The impact of migrant workers on the Japanese economy: Trickle vs. Flood

This paper analyzes the economic impact of temporary and unskilled migrant workers in Japan, who are illegal according to the current Japanese immigration law but who have been dramatically increasing in recent years. The analysis, using a simple CGE model, reveals the quadruple impact of the admission of migrant workers on the welfare of the host country which has often been neglected in the orthodox theory: (i) cheaper foreign labor effect (ii) trade barrier effect (iii) nontradable income effect and (iv) nontradable consumption effect. Moreover, it is shown that, if Japan is to benefit from admitting foreign labor, the scale of admission should be large and the admission should be accompanied by trade liberalization.