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Economic Integration, Factor Mobility, and Wage Convergence

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  • Gilles Saint-Paul

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Abstract

This paper studies the effect of economic integrationof two regions on the mobility of skilled and unskilled workersacross regions and on the resulting location of industrial activity.In particular, we study what happens when wages in both regionsare set by the unions of the ‘West’—the region with agreater initial relative stock of human capital. We show thatunder some circumstances, it is the interest of the West's unionsto set up a speed of wage convergence greater than equilibrium,thus generating unemployment in the East. This slows the migrationof human capital toward the East, but quickens the migrationof raw labor toward the West. A greater share of economic activityis eventually located in the Western region. Unions in the Westwill benefit from this provided human capital has low migrationcosts relative to raw labor. Copyright Kluwer Academic Publishers 1997

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Bibliographic Info

Article provided by Springer in its journal International Tax and Public Finance.

Volume (Year): 4 (1997)
Issue (Month): 3 (July)
Pages: 291-306

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Handle: RePEc:kap:itaxpf:v:4:y:1997:i:3:p:291-306

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Web page: http://www.springerlink.com/link.asp?id=102915

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  1. Brecher, Richard A. & Choudhri, Ehsan U., 1987. "International migration versus foreign investment in the presence of unemployment," Journal of International Economics, Elsevier, vol. 23(3-4), pages 329-342, November.
  2. Burda, Michael & Wyplosz, Charles, 1992. "Human capital, investment and migration in an integrated Europe," European Economic Review, Elsevier, vol. 36(2-3), pages 677-684, April.
  3. Decressin, Jörg & Fatás, Antonio, 1994. "Regional Labour Market Dynamics in Europe," CEPR Discussion Papers 1085, C.E.P.R. Discussion Papers.
  4. Burda, Michael C & Funke, Michael, 1991. "German Trade Unions After Unification: Third Degree Wage Discriminating Monopolists?," CEPR Discussion Papers 573, C.E.P.R. Discussion Papers.
  5. Jean-Pierre DANTHINE & Jennifer HUNT, 1992. "Wage Bargaining Structure, Employment and Economic Integration," Cahiers de Recherches Economiques du Département d'Econométrie et d'Economie politique (DEEP) 9204, Université de Lausanne, Faculté des HEC, DEEP.
  6. Klaus F. Zimmermann, 1995. "Tackling the European Migration Problems," Journal of Economic Perspectives, American Economic Association, vol. 9(2), pages 45-62, Spring.
  7. Rachel M. Friedberg & J. Hunt, 1995. "The Impact of Immigrants on Host Country Wages, Employment and Growth," Working Papers 95-5, Brown University, Department of Economics.
  8. Pissarides, Christopher A & McMaster, Ian, 1990. "Regional Migration, Wages and Unemployment: Empirical Evidence and Implications for Policy," Oxford Economic Papers, Oxford University Press, vol. 42(4), pages 812-31, October.
  9. Schmidt, Christoph M. & Stilz, Anette & Zimmermann, Klaus F., 1994. "Mass migration, unions, and government intervention," Journal of Public Economics, Elsevier, vol. 55(2), pages 185-201, October.
  10. Rudiger Dornbusch & Holger Wolf, 1992. "Economic Transition in Eastern Germany," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 23(1), pages 235-272.
  11. Gerlinde Sinn & Hans-Werner Sinn, 1994. "Jumpstart: The Economic Unification of Germany," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262691728, December.
  12. Gabriel, Stuart A. & Shack-Marquez, Janice & Wascher, William L., 1993. "Does migration arbitrage regional labor market differentials?," Regional Science and Urban Economics, Elsevier, vol. 23(2), pages 211-233, April.
  13. Manfred Keil & Andrew Newell, 1993. "Internal migration and unemployment in Germany: An anglo-irish perspective," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 129(3), pages 514-536, September.
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Cited by:
  1. Roberto Bande & Melchor Fernandez & Victor Montuenga, 2005. "Regional Unemployment in Spain: Disparities, Business Cycle and Wage Setting," Documentos de trabajo - Analise Economica 0035, IDEGA - Instituto Universitario de Estudios e Desenvolvemento de Galicia.
  2. Athanasios Vamvakidis, 2008. "Regional Wage Differentiation and Wage Bargaining Systems in the EU," IMF Working Papers 08/43, International Monetary Fund.

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