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Diverging Patterns in a Two Country Model with Endogenous Labor Migration

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  • REICHLIN, Pietro

    (Universita’ di Napoli “ Frederico II”)

  • RUSTICHINI, Aldo

    (CORE, Université catholique de Louvain, B-1348 Louvain-la-Neuve, Belgium and New York University)

Abstract

Models with endogenous growth due to production externalities imply that per capita output is positively affected by the size of the labor force (which we interpret as the stock of human capital). In this framework we investigate the effects of labor migration between two countries in the presence of free trade and perfect capital mobility. We show that any wage differential between countries sets up a continuous flow of migration of the workforce from the "low wage" country to the "high wage" country. This flow does not dampen over time and wage differentials become larger and larger. As a consequence, the former country will be permanently underdeveloped with respect to the latter. In a second part of the paper we modi fy the model to incorporate heterogeneous labor inputs (skilled and unskilled). Then, we study all the possible stable and unstable patterns of migration between countries and sectors and show that divergence as well as flow reversals are possible (the sending country may subsequentially become a receiving country).

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Bibliographic Info

Paper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers with number 1993032.

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Date of creation: 01 Sep 1993
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Handle: RePEc:cor:louvco:1993032

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Cited by:
  1. Stolz, Yvonne & Baten, Jörg & Botelho, Tarcísio, 2011. "Growth effects of 19th century mass migrations: "Fome Zero" for Brazil," University of Tuebingen Working Papers in Economics and Finance 20, University of Tuebingen, Faculty of Economics and Social Sciences.
  2. Reichlin, Pietro & Rustichini, Aldo, 1998. "Diverging patterns with endogenous labor migration," Journal of Economic Dynamics and Control, Elsevier, vol. 22(5), pages 703-728, May.
  3. Magris, Francesco & Russo, Giuseppe, 2009. "Selective immigration policies, human capital accumulation and migration duration in infinite horizon," Research in Economics, Elsevier, vol. 63(2), pages 114-126, June.
  4. Stephen Drinkwater & Paul Levine & Emanuela Lotti & Joseph Pearlman, 2003. "The Economic Impact of Migration: A Survey," School of Economics Discussion Papers 0103, School of Economics, University of Surrey.
  5. Faini, Riccardo, 1996. "Increasing returns, migrations and convergence," Journal of Development Economics, Elsevier, vol. 49(1), pages 121-136, April.

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