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Reconciling the Pattern of Trade with the Pattern of Migration

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  • Rauch, James E

Abstract

If only skilled (educated) individuals can become managers, then to employ fully its work force, given a distribution of managerial talent, a country in which skilled labor is scarce must use a less talented manager at the margin than a country in which skilled labor is abundant. Wages for unskilled workers and skilled individuals who choose to become employees are then lower in the former country, while incomes of skilled individuals talented enough to become managers are lower (for a given talent level) in the latter. Countries with abundant skilled labor therefore export managers (e.g., through multinational subsidiaries) and skilled-labor-intensive goods yet import skilled employees (the "brain drain"). Copyright 1991 by American Economic Association.

Suggested Citation

  • Rauch, James E, 1991. "Reconciling the Pattern of Trade with the Pattern of Migration," American Economic Review, American Economic Association, vol. 81(4), pages 775-796, September.
    • Handle: RePEc:aea:aecrev:v:81:y:1991:i:4:p:775-96
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    Cited by:

    1. Baruch, Yehuda & Budhwar, Pawan S. & Khatri, Naresh, 2007. "Brain drain: Inclination to stay abroad after studies," Journal of World Business, Elsevier, vol. 42(1), pages 99-112, March.
    2. Andreas Hatzigeorgiou & Patrik Karpaty & Richard Kneller & Magnus Lodefalk, 2024. "Immigrant employment and the contract enforcement costs of offshoring," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 160(3), pages 953-981, August.
    3. Andreas Hatzigeorgiou & Magnus Lodefalk, 2016. "Migrants’ Influence on Firm-level Exports," Journal of Industry, Competition and Trade, Springer, vol. 16(4), pages 477-497, December.
    4. Iranzo, Susana & Peri, Giovanni, 2009. "Migration and trade: Theory with an application to the Eastern-Western European integration," Journal of International Economics, Elsevier, vol. 79(1), pages 1-19, September.
    5. Rauch, James E., 2010. "Development through synergistic reforms," Journal of Development Economics, Elsevier, vol. 93(2), pages 153-161, November.
    6. Hatzigeorgiou, Andreas & Lodefalk, Magnus, 2018. "Anti-Migration as a Threat to Internationalization? A Review of the Migration-Internationalization Literature," GLO Discussion Paper Series 287, Global Labor Organization (GLO).
    7. Weel, Bas ter, 1999. "Investing in Knowledge: On the Trade-Off between R&D, ICT, Skills and Migration," Research Memorandum 024, Maastricht University, Maastricht Economic Research Institute on Innovation and Technology (MERIT).
    8. Hatzigeorgiou, Andreas & Lodefalk, Magnus, 2017. "Anti-Migration as a Threat to Internationalization?," Ratio Working Papers 302, The Ratio Institute.
    9. Iranzo, Susana & Peri, Giovanni, 2009. "Migration and trade: Theory with an application to the Eastern-Western European integration," Journal of International Economics, Elsevier, vol. 79(1), pages 1-19, September.
    10. Silva, André C., 2010. "Managerial ability and capital flows," Journal of Development Economics, Elsevier, vol. 93(1), pages 126-136, September.
    11. M.A.B. Siddique, 2006. "Immigration and Trade: How Important is the link? Evidence from Australia," Economics Discussion / Working Papers 06-08, The University of Western Australia, Department of Economics.
    12. Spiros Bougheas & Douglas R. Nelson, 2012. "Skilled Worker Migration and Trade: Inequality and Welfare," The World Economy, Wiley Blackwell, vol. 35(2), pages 197-215, February.
    13. Dunlevy, James A. & Hutchinson, William K., 2001. "The Pro-Trade Effect of Immigration on American Exports During the Late Nineteenth and Early Twentieth Centuries," IZA Discussion Papers 375, Institute of Labor Economics (IZA).
    14. Hatzigeorgiou, Andreas & Lodefalk, Magnus, 2018. "Do Migrants Facilitate Internationalization? A Review of the Literature," Working Papers 2018:11, Örebro University, School of Business, revised 19 Dec 2019.
    15. Commander, Simon & Kangasniemi, Mari & Winters, L. Alan, 2003. "The Brain Drain: Curse or Boon?," IZA Discussion Papers 809, Institute of Labor Economics (IZA).
    16. Ariel T. Burstein & Alexander Monge-Naranjo, 2009. "Foreign Know-How, Firm Control, and the Income of Developing Countries," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 124(1), pages 149-195.
    17. Schmitt, Nicolas & Soubeyran, Antoine, 2006. "A simple model of brain circulation," Journal of International Economics, Elsevier, vol. 69(2), pages 296-309, July.

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