Barriers to immigration and the dynamics of emigration

•Migration costs affect the process of capital accumulation in the source country.•Shocks that stimulate emigration are shown to generate larger flows, the higher the costs of migration.•Increases in migration costs may actually raise both the stock and flow of emigrants.

In a dynamic model of emigration and return migration I examine the role of migration costs in the process of capital accumulation of the source country. Every migration attempt reduces the amount of savings available for capital accumulation. It contributes, however, to an increase in the per-capita capital stock of the source country if the migrants leave some of their capital behind or decide to return and repatriate accumulated savings. The interaction among these flows governs the evolution of the economy’s capital stock and factor rewards, which in turn affects the decisions to emigrate and return migrate. Both the quantitative and qualitative effects of host-country policies and other disturbances on the key macroeconomic variables of the source country are found to depend on the level of migration costs.