National labor markets, international factor mobility and macroeconomic instability
AbstractWe consider a standard twoâcountry environment, where one of the countries has rigid wages and unemployment, and analyze how factor marketsâ integration affects the economy with respect to expectationsdriven fluctuations. We demonstrate that by allowing free capital mobility, indeterminacy is exported to the world economy. If further liberalization is permitted, by allowing free movements of labor, the scope for indeterminacy is reduced and open labor markets may produce a stabilizing effect on the global macroeconomy. Whether this also implies higher welfare in the long run depends on differentials in average firm size across countries.
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Bibliographic InfoArticle provided by Springer in its journal Economic Theory.
Volume (Year): 43 (2010)
Issue (Month): 3 (June)
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Web page: http://link.springer.de/link/service/journals/00199/index.htm
Other versions of this item:
- Marta Aloi & Teresa Lloyd-Braga, . "National Labor Markets, International Factor Mobility and Macroeconomic Instability," Discussion Papers 09/10, University of Nottingham, Centre for Finance, Credit and Macroeconomics (CFCM).
- Aloi, Marta & Lloyd-Braga, Teresa, 2006. "National Labour Markets, International Factor Mobility and Macroeconomic Instability," CEPR Discussion Papers 6015, C.E.P.R. Discussion Papers.
- E24 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution
- E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
- F15 - International Economics - - Trade - - - Economic Integration
- F20 - International Economics - - International Factor Movements and International Business - - - General
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