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The Balassa-Samuelson Hypothesis and Elderly Migration

Listed author(s):
  • Oscar Iván Ávila

    ()

  • Mauricio ROdríguez
  • Hernando Zuleta

We present a model with two Overlapping Generations (young and old) and two final goods: a) a tradable good that is produced using capital and labor, and b) a non-tradable good that is produced using labor as unique input. We maintain the fundamental assumption of perfect factor mobility between sectors so the model is consistent with the Balassa-Samuelson hypothesis. On top of this, we allow for one of the two generations (the elderly) to migrate between economies. Given the general equilibrium structure of our model, we can examine the effect of the propensity to save on migration and the relative price of the non-tradable good. In this setting, we find that the elderly have incentives to migrate from economies where productivity is high to economies with low productivity because of the lower cost of living (in more general terms, the elderly migrate from wealthy countries to countries with lower incomes). We also find that, for countries with lower incomes, elderly migration has a positive effect on wages and capital accumulation.

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Article provided by Banco de la Republica de Colombia in its journal Ensayos sobre Política Económica.

Volume (Year): 32 (2014)
Issue (Month): 74 (Junio)
Pages: 1-8

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Handle: RePEc:bdr:ensayo:v:32:y:2014:i:74:p:1-8
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  1. Swan, Trevor W, 2002. "Economic Growth," The Economic Record, The Economic Society of Australia, vol. 78(243), pages 375-380, December.
  2. Égert, Balázs, 2002. "Investigating the Balassa-Samuelson hypothesis in transition : Do we understand what we see?," BOFIT Discussion Papers 6/2002, Bank of Finland, Institute for Economies in Transition.
  3. Dumitru, Ionut & Jianu, Ionela, 2009. "The Balassa-Samuelson effect in Romania - The role of regulated prices," European Journal of Operational Research, Elsevier, vol. 194(3), pages 873-887, May.
  4. Heather Gibson & Jim Malley, 2008. "The Contribution of Sectoral Productivity Differentials to Inflation in Greece," Open Economies Review, Springer, vol. 19(5), pages 629-650, November.
  5. Bela Balassa, 1964. "The Purchasing-Power Parity Doctrine: A Reappraisal," Journal of Political Economy, University of Chicago Press, vol. 72, pages 584-584.
  6. Takatoshi Ito & Peter Isard & Steven Symansky, 1999. "Economic Growth and Real Exchange Rate: An Overview of the Balassa-Samuelson Hypothesis in Asia," NBER Chapters,in: Changes in Exchange Rates in Rapidly Developing Countries: Theory, Practice, and Policy Issues (NBER-EASE volume 7), pages 109-132 National Bureau of Economic Research, Inc.
  7. T. W. Swan, 1956. "ECONOMIC GROWTH and CAPITAL ACCUMULATION," The Economic Record, The Economic Society of Australia, vol. 32(2), pages 334-361, November.
  8. Cebula, Richard J., 1993. "The impact of living costs on geographic mobility," The Quarterly Review of Economics and Finance, Elsevier, vol. 33(1), pages 101-105.
  9. Sándor Illés, 2005. "Elderly immigration to Hungary," Migration Letters, Transnational Press London, UK, vol. 2(2), pages 164-169, October.
  10. Rumen Dobrinsky, 2003. "Convergence in Per Capita Income Levels, Productivity Dynamics and Real Exchange Rates in the EU Acceding Countries," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 30(3), pages 305-334, September.
  11. Hughes, Gordon & McCormick, Barry, 1981. "Do Council Housing Policies Reduce Migration between Regions?," Economic Journal, Royal Economic Society, vol. 91(364), pages 919-937, December.
  12. Falvey, Rodney E & Gemmell, Norman, 1996. "A Formalisation and Test of the Factor Productivity Explanation of International Differences in Service Prices," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 37(1), pages 85-102, February.
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