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TFP Differences and the Aggregate Effects of Labor Mobility in the Long Run

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  • Klein Paul

    ()
    (University of Western Ontario)

  • Ventura Gustavo J

    ()
    (Pennsylvania State University)

Abstract

The coexistence of barriers to labor mobility with large output-per-worker disparities driven by Total Factor Productivity (TFP) differences suggests that the world's labor force is misallocated across countries. We investigate the extent and consequences of this potential misallocation in the context of a simple two-location growth model, in which production requires capital, labor and an essential immobile factor (land). We characterize the magnitude of labor movements implied by an efficient long-run allocation, and derive their implications for capital accumulation. Quantitatively, even for moderate TFP differences, we find substantial increases in world output associated with efficient allocations. These output increases are driven by large movements of labor from low to high TFP countries, as well as by a sizeable increase in the capital stock and changes in its endogenous division across countries. Our results are robust to a large set of parameter values, including unrealistically conservative ones.

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Bibliographic Info

Article provided by De Gruyter in its journal The B.E. Journal of Macroeconomics.

Volume (Year): 7 (2007)
Issue (Month): 1 (May)
Pages: 1-38

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Handle: RePEc:bpj:bejmac:v:7:y:2007:i:1:n:10

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Cited by:
  1. Susana Iranzo & Giovanni Peri, 2007. "Migration and Trade in a World of Technological Differences: Theory with an Application to Eastern-Western European Integration," NBER Working Papers 13631, National Bureau of Economic Research, Inc.
  2. Susana Iranzo & Giovanni Peri, 2009. "Migration and Trade: Theory with an Application to the Eastern-Western European Integration," Working Papers 97, University of California, Davis, Department of Economics.
  3. Karin Mayr, 2008. "Optimal quota for sector-specific immigration," Economics working papers 2008-07, Department of Economics, Johannes Kepler University Linz, Austria.
  4. Gabriel J. FELBERMAYR & Benjamin JUNG & Farid TOUBAL, 2010. "Ethnic Networks, Information, and International Trade: Revisiting the Evidence," Annales d'Economie et de Statistique, ENSAE, issue 97-98, pages 41-70.

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