Temporary foreign workers and firms: Theory and Canadian evidence

Temporary foreign worker (TFW) programs have grown considerably in size when uncapped. We develop a simple efficiency‐wage model to explain this phenomenon and examine the empirical evidence for it. We also use the model to evaluate the implications of TFW programs for domestic workers. In our framework, firms that have been unable to find domestic workers may hire TFWs at the wage previously advertised to domestic workers. Due to the lower...