Immigration of Medical Workers and Variable Labour Supply
| Author | Masayuki Okawa |
| DOI | http://doi.org/10.1177/00157325221119048 |
| Published date | 01 February 2023 |
| Date | 01 February 2023 |
| Subject Matter | Articles |
Immigration of Medical
Workers and Variable
Labour Supply
Masayuki Okawa1
Abstract
This paper studies the effects of immigration policy on the immigration of foreign
medical workers on the welfare and income distribution of home medical work-
ers and labourers. We set up a simple small open economy with two traded
goods and non-traded medical care services. In the economy, there exists a con-
stant rate of labourers who get ill health and must leave their jobs and thereby
lose part of their income. But they can reduce the loss of working time and
income by consuming medical services. There are two channels that consump-
tion of the medical service affects the welfare of consumers: (i) consumption of
medical service raises the state of health and increases utility, and (ii) consump-
tion of medical service reduces the leave period of labourers and raises their
wage income (labour supply-enhancing effect). We see that the above second
effect makes the effective price of the medical service for the consumer lower
than its market price and causes consumption bias towards the consumption of
medical services. To introduce the above properties of consumption of medical
service, we define the effective expenditure function of the labourers and exam-
ine its properties and conduct comparative static analyses.
JEL codes: F13, F22
Keywords:
Immigration, medical worker, medical service, state of health, variable labour
supply, effective expenditure function
Article
Foreign Trade Review
58(1) 100–120, 2023
© 2022 Indian Institute of
Foreign Trade
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DOI: 10.1177/00157325221119048
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1 Faculty of Economics, Ritsumeikan University, Noji-Higashi, Kusatsu, Shiga, Japan.
Correspondence author:
Masayuki Okawa, Faculty of Economics, Ritsumeikan University, Noji-Higashi, Kusatsu, Shiga 525-
8577, Japan.
E-mail: mokawa@ec.ritsumei.ac.jp
Okawa 101
Introduction
In the standard model of international trade, factor supplies are assumed to be of
completely inelastic. In the seminal paper, Kemp and Jones (1962) set up a two
factor, two good small open economy model and extended the standard model
based on the assumption of inelastic factor supply to incorporate variable labour
supply. They analysed several familiar trade problems under the assumption of a
variable labour supply. A household’s utility depends on the consumption of two
goods and leisure. Consumption of leisure takes time; leisure reduces working
time and wage income of the household. The price of leisure is its opportunity
cost of lost time and wage income of labour. The demand for leisure and thus the
supply of labour hours is endogenously determined as the results of the house-
hold’s utility maximisation behaviour. The analysis by Kemp and Jones (1962) is
modified and extended by, among others, Martin and Neary (1980), Woodland
(1982) and Mayer (1991).
On the other hand, there are an abundant variety of leisure services which the
households consume by paying their market prices: tickets for music concerts,
films, travels and so on. The price of such a leisure for the household is equal to
its market price plus his/her lost wage income.
In the recent paper, Kemp (2010) introduced the Gossenian assumption that all
consumption and production of commodities take time and are subject to the time
constraint of 24 hours a day into an international trade setting and demonstrated
that the results on the gains from trade proposition in the Kemp and Wan (1972)
still hold. His analysis is followed by a series of papers by Tran-Nam (2012, 2018)
and Le-Van et al. (2018).1
As one of the services of which consumption takes time is medical services. The
consumption of medical services certainly raises the utility of the consumers by
increasing their state of health. It is considered that consumption of medical services
takes time, and patients must leave their jobs or labour markets until they recover
their health condition. Then, they can go back to their works and earn their wage
income again. We assume that there always exists a certain rate of the labourers who
get illness and/or health problems in an economy. If those labourers do not have
medical treatments, they had to leave their jobs for longer periods and lose more
wage income than those they have medical treatments. Thus, the consumption of
medical services by the labourers can shorten their sick leave periods and can
increase the supply of labour and reduce the losses of wage incomes. Therefore, this
labour supply-enhancing effect is specific to the consumption of medical services.
In a simple consumers theory, consumers are assumed to maximise their utility
subject to exogenously given good prices and income. However, if consumers of
medical services consider the above significant effect that consumption of medi-
cal services raises their potential labour supply and income, they should consider
that effect in determining the optimal consumption of medical services.2
Therefore, this paper introduces and applies the variable labour supply model
analysed by Kemp and Jones (1962), and the consumption takes time settings in
Kemp (2010) and Tran-Nam (2012, 2018) to our simple trading model with non-
traded medical service.
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