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Labor Mobility, Trade, and Social Capital

  • Maurice Schiff

Labor market integration raises welfare in the absence of distortions. This paper examines labor and goods market integration in a general-equilibrium model with social capital. The findings are: (i) labor market integration has an ambiguous impact on welfare, and raises it if the goods and labor skills are sufficiently different; (ii) compared to Pareto optimum, labor mobility (social capital) is excessively large (depleted); (iii) trade is superior to labor market integration if trading costs are no higher than private migration costs, otherwise the outcome is ambiguous; and (iv) the creation of new institutions in response to labor market integration has an ambiguous impact on welfare. Copyright Blackwell Publishing Ltd 2004.

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Article provided by Wiley Blackwell in its journal Review of International Economics.

Volume (Year): 12 (2004)
Issue (Month): 4 (09)
Pages: 630-642

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Handle: RePEc:bla:reviec:v:12:y:2004:i:4:p:630-642
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  1. Edward P. Lazear, 1995. "Culture and Language," NBER Working Papers 5249, National Bureau of Economic Research, Inc.
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