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How Does Labor Mobility Affect Income Convergence?

  • Jordan M. Rappaport

    (Federal Reserve Bank of Kansas City)

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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Paper provided by Econometric Society in its series Econometric Society World Congress 2000 Contributed Papers with number 0124.

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Date of creation: 01 Aug 2000
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Handle: RePEc:ecm:wc2000:0124
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