Do Migration Restrictions Matter?
Migration restrictions are pervasive and severe. Their worldwide enactment starting in the 1920's constituted a fundamental policy shift for a number of countries and for the world as whole. Yet, very little is currently known about the quantitative consequences of these barriers to labor mobility, and their significance vis-a-vis capital mobility. In this paper, we ask: quantitatively, what are the consequences for allocations and welfare of reducing or eliminating barriers to international migration? We answer this question in a life-cycle model of the world economy in which capital is endogenously accumulated, and both capital and labor are potentially mobile. Heterogeneous individuals decide when and whether to migrate given current and future prices. Output is produced using three inputs: capital, labor and land. The presence of a fixed factor (land) enables us to distinguish the effects of capital and labor mobility. Preliminary calculations show that restrictions do matter: their removal leads to significant increases in world's output and capital stock, and to sizeable increases in the welfare of natives of poor countries.
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|Date of creation:||11 Aug 2004|
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