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TFP Differences and the Aggregate Effects of Labor Mobility in the Long Run

Author

Listed:
  • Klein Paul

    () (University of Western Ontario)

  • Ventura Gustavo J

    () (Pennsylvania State University)

Abstract

The coexistence of barriers to labor mobility with large output-per-worker disparities driven by Total Factor Productivity (TFP) differences suggests that the world's labor force is misallocated across countries. We investigate the extent and consequences of this potential misallocation in the context of a simple two-location growth model, in which production requires capital, labor and an essential immobile factor (land). We characterize the magnitude of labor movements implied by an efficient long-run allocation, and derive their implications for capital accumulation. Quantitatively, even for moderate TFP differences, we find substantial increases in world output associated with efficient allocations. These output increases are driven by large movements of labor from low to high TFP countries, as well as by a sizeable increase in the capital stock and changes in its endogenous division across countries. Our results are robust to a large set of parameter values, including unrealistically conservative ones.

Suggested Citation

  • Klein Paul & Ventura Gustavo J, 2007. "TFP Differences and the Aggregate Effects of Labor Mobility in the Long Run," The B.E. Journal of Macroeconomics, De Gruyter, vol. 7(1), pages 1-38, May.
  • Handle: RePEc:bpj:bejmac:v:7:y:2007:i:1:n:10
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    Citations

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    Cited by:

    1. Biavaschi, Costanza & Burzynski, Michal & Elsner, Benjamin & Machado, Joel, 2016. "The Gain from the Drain: Skill-biased Migration and Global Welfare," IZA Discussion Papers 10275, Institute for the Study of Labor (IZA).
    2. David de la Croix & Frederic Docquier, 2015. "An Incentive Mechanism to Break the Low-skill Immigration Deadlock," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 18(3), pages 593-618, July.
    3. Gabriel J. Felbermayr & Benjamin Jung & Farid Toubal, 2010. "Ethnic Networks, Information, and International Trade: Revisiting the Evidence," Annals of Economics and Statistics, GENES, issue 97-98, pages 41-70.
    4. Frédéric Docquier & Joël Machado & Khalid Sekkat, 2015. "Efficiency Gains from Liberalizing Labor Mobility," Scandinavian Journal of Economics, Wiley Blackwell, vol. 117(2), pages 303-346, April.
    5. Clemens, Michael & Pritchett, Lant, 2016. "The New Case for Migration Restrictions: An Assessment," Working Paper Series rwp16-054, Harvard University, John F. Kennedy School of Government.
    6. Costanza Biavaschi & Micha? Burzynski & Benjamin Elsner & Joël Machado, 2018. "Taking the Skill Bias out of Global Migration," Working Papers 201808, School of Economics, University College Dublin.
    7. John Kennan, 2016. "Open Borders in the European Union and Beyond: Migration Flows and Labor Market Implications," 2016 Meeting Papers 1359, Society for Economic Dynamics.
    8. 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.
    9. Castro, Rui & Koumtingué, Nelnan, 2014. "On the individual optimality of economic integration," Journal of Monetary Economics, Elsevier, vol. 68(C), pages 115-135.
    10. Soojin Kim, 2014. "The Effects of Labor Migration on Optimal Taxation: An International Tax Competition Analysis," 2014 Meeting Papers 508, Society for Economic Dynamics.
    11. Susana Iranzo & Giovanni Peri, 2007. "Migration and Trade in a World of Technological Differences: Theory with an Application to Eastern-Western European Integration," NBER Working Papers 13631, National Bureau of Economic Research, Inc.
    12. Jose Antonio Alonso, 2015. "Managing Labour Mobility: A Missing Pillar of Global Governance," CDP Background Papers 026, United Nations, Department of Economics and Social Affairs.
    13. George J. Borjas, 2015. "Immigration and Globalization: A Review Essay," Journal of Economic Literature, American Economic Association, vol. 53(4), pages 961-974, December.
    14. Chakrabarti, Anindya S. & Dutta, Aparna, 2015. "Economic incentives versus institutional frictions: migration dynamics within Europe," IIMA Working Papers WP2015-08-06, Indian Institute of Management Ahmedabad, Research and Publication Department.
    15. Karin Mayr, 2008. "Optimal quota for sector-specific immigration," Economics working papers 2008-07, Department of Economics, Johannes Kepler University Linz, Austria.
    16. Chakrabarti, Anindya S. & Sengupta, Aparna, 2017. "Productivity differences and inter-state migration in the U.S.: A multilateral gravity approach," Economic Modelling, Elsevier, vol. 61(C), pages 156-168.
    17. Michał BURZYŃSKI, 2014. "Trading Goods or Human Capital The Winners and Losers of Economic Integration," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2014022, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
    18. Claudia Noumedem Temgoua, 2018. "Highly skilled migration and the internationalization of knowledge," Cahiers du GREThA 2018-16, Groupe de Recherche en Economie Théorique et Appliquée.
    19. Shyam Gouri Suresh, 2015. "The Aggregate and Distributional Effects of Migration Policies: A Multifaceted Analysis," Working Papers 15-01, Davidson College, Department of Economics.

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