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How does labor mobility affect income convergence?

  • Rappaport, Jordan

The neoclassical growth model is extended to allow for mobile labor. Following a negative shock to a small economy's capital stock, capital and labor frictions effect an equilibrium transition path during which wages remain below their steady-state level. Outmigration directly contributes to faster income convergence but also creates a disincentive for gross capital formation. The net result is that across a wide range of calibrations, the speed of income convergence is relatively insensitive to the degree of labor mobility.

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Article provided by Elsevier in its journal Journal of Economic Dynamics and Control.

Volume (Year): 29 (2005)
Issue (Month): 3 (March)
Pages: 567-581

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Handle: RePEc:eee:dyncon:v:29:y:2005:i:3:p:567-581
Contact details of provider: Web page: http://www.elsevier.com/locate/jedc

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