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Economic Integration, Factor Mobility, and Wage Convergence

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  • Gilles Saint-Paul

Abstract

This paper studies the effect of economic integrationof two regions on the mobility of skilled and unskilled workersacross regions and on the resulting location of industrial activity.In particular, we study what happens when wages in both regionsare set by the unions of the ‘West’—the region with agreater initial relative stock of human capital. We show thatunder some circumstances, it is the interest of the West's unionsto set up a speed of wage convergence greater than equilibrium,thus generating unemployment in the East. This slows the migrationof human capital toward the East, but quickens the migrationof raw labor toward the West. A greater share of economic activityis eventually located in the Western region. Unions in the Westwill benefit from this provided human capital has low migrationcosts relative to raw labor. Copyright Kluwer Academic Publishers 1997

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  • Gilles Saint-Paul, 1997. "Economic Integration, Factor Mobility, and Wage Convergence," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 4(3), pages 291-306, July.
    • Handle: RePEc:kap:itaxpf:v:4:y:1997:i:3:p:291-306
    DOI: 10.1023/A:1008664304685
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    1. Manfred Keil & Andrew Newell, 1993. "Internal migration and unemployment in Germany: An anglo-irish perspective," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 129(3), pages 514-536, September.
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    Cited by:

    1. Luminita VOCHITA & George CIOBANU & Andreea CIOBANU, 2008. "Implications of wage bargaining systems on regional differentiation in the European Union," Annals of University of Craiova - Economic Sciences Series, University of Craiova, Faculty of Economics and Business Administration, vol. 2(36), pages 862-873, may.
    2. Athanasios Vamvakidis, 2009. "Regional Wage Differentiation and Wage Bargaining Systems in the European Union," Financial Theory and Practice, Institute of Public Finance, vol. 33(1), pages 73-87.
    3. Mr. Athanasios Vamvakidis, 2008. "Regional Wage Differentiation and Wage Bargaining Systems in the EU," IMF Working Papers 2008/043, International Monetary Fund.
    4. Martin Hallet, 1998. "The regional impact of the single currency," ERSA conference papers ersa98p27, European Regional Science Association.
    5. Kaji, Sahoko, 1998. "Successful Structural Reforms after EMU," Journal of the Japanese and International Economies, Elsevier, vol. 12(4), pages 507-534, December.
    6. Bande, Roberto & Fernández, Melchor & Montuenga, Víctor, 2008. "Regional unemployment in Spain: Disparities, business cycle and wage setting," Labour Economics, Elsevier, vol. 15(5), pages 885-914, October.
    7. Hallet, Martin, 1999. "The Impact of EMU on cohesion - further research needed?," ERSA conference papers ersa99pa087, European Regional Science Association.

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    More about this item

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
    • J5 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining
    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers

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