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International Migration, Capital Mobility and Transitional Dynamics

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  • Baldwin, Richard
  • Venables, Anthony J

Abstract

The authors study interactions between goods trade and international factor mobility in a context suggestive of transition in Central and Eastern Europe. If complementarities between skilled labor and capital are strong--e.g., owing to externalities between skilled labor and costs of absorbing capital inflow--then there are multiple rational expectations equilibria. The 'virtuous' transition path has capital inflow and little emigration; the 'vicious' path involves significant emigration and little capital inflow. The equilibrium transition path is not socially optimal even absent externalities. Externalities associated with skilled labor increase the case for intervention; policy should be used to delete the vicious equilibrium. Copyright 1994 by The London School of Economics and Political Science.

Suggested Citation

  • Baldwin, Richard & Venables, Anthony J, 1994. "International Migration, Capital Mobility and Transitional Dynamics," Economica, London School of Economics and Political Science, vol. 61(243), pages 285-300, August.
  • Handle: RePEc:bla:econom:v:61:y:1994:i:243:p:285-300
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    References listed on IDEAS

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    Cited by:

    1. John F. Helliwell, 2004. "Demographic changes and international factor mobility," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, issue Aug, pages 369-420.
    2. Debra Patterson, 1999. "An open-economy transition model," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 5(1), pages 24-36, February.
    3. Buch, Claudia M. & Kleinert, Jorn & Toubal, Farid, 2006. "Where enterprises lead, people follow? Links between migration and FDI in Germany," European Economic Review, Elsevier, vol. 50(8), pages 2017-2036, November.
    4. Schiff, Maurice, 1999. "Trade, migration, and welfare : the impact of social capital," Policy Research Working Paper Series 2044, The World Bank.
    5. Iskra Christova-Balkanska, 2011. "Emigration and Foreign Direct Investments: Links and Impact on the Bulgarian Economy," Economic Studies journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 2, pages 80-103.
    6. G. Ottaviano, 1995. "A Geographic Approach to International Economics: 'Strategic Trade Policy'?," Working Papers 216, Dipartimento Scienze Economiche, Universita' di Bologna.
    7. Maroula Khraiche, 2009. "Trade, Firm Structure, and Migration of Talent," Working papers 2009-35, University of Connecticut, Department of Economics.
    8. Didier Laussel & Philippe Michel & Thierry Paul, 2004. "Intersectoral adjustment and unemployment in a two-country Ricardian model. Une approche par la méthode événementielle," Recherches économiques de Louvain, De Boeck Université, vol. 70(2), pages 169-192.
    9. Didier LAUSSEL & Philippe MICHEL & Thierry Paul, 2004. "Intersectoral adjustment and unemployment in a two-country Ricardian model," Discussion Papers (REL - Recherches Economiques de Louvain) 2004023, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
    10. Giorgio Barba Navaretti & Giuseppe Bertola & Alessandro Sembenelli, 2008. "Offshoring and Immigrant Employment: Firm-level Theory and Evidence," Development Working Papers 245, Centro Studi Luca d'Agliano, University of Milano.
    11. repec:kap:iaecre:v:5:y:1999:i:1:p:24-36 is not listed on IDEAS
    12. Artjoms Ivlevs, 2006. "Migration and Foreign Direct Investment in the Globalization Context: the Case of a Small Open Economy," Development Working Papers 209, Centro Studi Luca d'Agliano, University of Milano.
    13. Mossay, Pascal, 2013. "A theory of rational spatial agglomerations," Regional Science and Urban Economics, Elsevier, vol. 43(2), pages 385-394.
    14. Haavio, Markus, 2005. "Transboundary pollution and household mobility: Are they equivalent?," Journal of Environmental Economics and Management, Elsevier, vol. 50(2), pages 252-275, September.
    15. Khraiche, Maroula, 2014. "Trade, capital adjustment and the migration of talent," International Review of Economics & Finance, Elsevier, vol. 34(C), pages 24-40.

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