Temporary migration, indeterminacy and growth

This study develops a one-sector, small open economy growth model to examine the effects of temporary migration on macroeconomic stability and growth of host countries. The analysis focuses on general production technology, treating native and immigrant workers as distinct labor inputs. Findings suggest that diminished marginal returns to capital may be responsible for the emergence of equilibrium indeterminacy. However, when the social benefits of production differ from private benefits, the model exhibits a unique saddle-path equilibrium with no endogenous growth. • A dynamic small open economy model with temporary migration is developed. • Without external effects, the steady-state equilibrium is locally indeterminate. • With external effects, the steady state is stable but does not support growth. • Policy implications are drawn from the main results of each model.