This paper builds a multi-sector, three country (centre and two peripheries), New Economic Geography model, where industrial sectors differ in the degree of scale economies and skill-intensity. The model incorporates, for the first time in this class of models, payments to the unemployed in each country. The model is used to evaluate the impact of migration in the enlarged EU, and would also be directly relevant for the NAFTA countries, under a range of possible migration scenarios involving three types of workers: skilled, unskilled, and unemployed. Full migration is the only scenario in which the central country obtains an increase in both skilled and unskilled wages and employment levels. The obverse is true for the two peripheral countries, they lose firms and real wages decline. As a consequence, the central country has an interest in allowing for full migration but the two peripheral countries have an interest in restricting migration.
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Paper provided by DEGIT, Dynamics, Economic Growth, and International Trade in its series DEGIT Conference Papers with number
c010_034.
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