Labor Mobility, Trade, and Social Capital
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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Volume (Year): 12 (2004)
Issue (Month): 4 (09)
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