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Income Convergence Within an Economic Union : The Role of Factor Mobility and Coordination

Author

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  • Razin, A
  • Yuen, C-W

Abstract

In the context of a human capital based growth model, we show the essential role of labor mobility in equalizing income levels for countries that start off from different initial income positions. Human capital externalities cum labor mobility are the driving forces behind the income level equalization process. In a non-cooperative equilibrium, labor mobility will be limited and income level equality will not be achieved.

Suggested Citation

  • Razin, A & Yuen, C-W, 1997. "Income Convergence Within an Economic Union : The Role of Factor Mobility and Coordination," Papers 13-97, Tel Aviv.
  • Handle: RePEc:fth:teavfo:13-97
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    References listed on IDEAS

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    1. Ben-David, Dan, 1996. "Trade and convergence among countries," Journal of International Economics, Elsevier, vol. 40(3-4), pages 279-298, May.
    2. Assaf Razin & Chi-Wa Yuen, 1996. "Labor Mobility and Fiscal Coordination," NBER Working Papers 5433, National Bureau of Economic Research, Inc.
    3. Andrew Atkeson & Tamim Bayoumi, 1993. "Do private capital markets insure regional risk? Evidence from the United States and Europe," Open Economies Review, Springer, vol. 4(3), pages 303-324, September.
    4. Lucas, Robert E, Jr, 1990. "Why Doesn't Capital Flow from Rich to Poor Countries?," American Economic Review, American Economic Association, vol. 80(2), pages 92-96, May.
    5. Mendoza, Enrique G. & Razin, Assaf & Tesar, Linda L., 1994. "Effective tax rates in macroeconomics: Cross-country estimates of tax rates on factor incomes and consumption," Journal of Monetary Economics, Elsevier, vol. 34(3), pages 297-323, December.
    6. Eichengreen, Barry, 1990. "One Money for Europe? Lessons from the US Currency Union," Department of Economics, Working Paper Series qt6ks1k831, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
    7. Razin, Assaf & Sadka, Efraim, 1991. "International tax competition and gains from tax harmonization," Economics Letters, Elsevier, vol. 37(1), pages 69-76, September.
    8. Tamura, Robert, 1991. "Income Convergence in an Endogenous Growth Model," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 522-540, June.
    9. Rebelo, Sergio, 1991. "Long-Run Policy Analysis and Long-Run Growth," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 500-521, June.
    10. Robert J. Barro & Xavier Sala-i-Martin, 1991. "Convergence across States and Regions," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 22(1), pages 107-182.
    11. Bayoumi, Tamim & Masson, Paul R., 1995. "Fiscal flows in the United States and Canada: Lessons for monetary union in Europe," European Economic Review, Elsevier, vol. 39(2), pages 253-274, February.
    12. Jaume Ventura, 1997. "Growth and Interdependence," The Quarterly Journal of Economics, Oxford University Press, vol. 112(1), pages 57-84.
    13. Rebelo, Sergio, 1992. "Growth in open economies," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 36(1), pages 5-46, July.
    14. Barro, Robert J & Sala-i-Martin, Xavier, 1992. "Convergence," Journal of Political Economy, University of Chicago Press, vol. 100(2), pages 223-251, April.
    15. Gordon, Roger H, 1986. "Taxation of Investment and Savings in a World Economy," American Economic Review, American Economic Association, vol. 76(5), pages 1086-1102, December.
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    Cited by:

    1. Changkyu Choi, 2004. "Foreign direct investment and income convergence," Applied Economics, Taylor & Francis Journals, vol. 36(10), pages 1045-1049.
    2. Caliendo, Marco & Künn, Steffen & Mahlstedt, Robert, 2017. "The return to labor market mobility: An evaluation of relocation assistance for the unemployed," Journal of Public Economics, Elsevier, vol. 148(C), pages 136-151.
    3. Falko Juessen, 2009. "A distribution dynamics approach to regional GDP convergence in unified Germany," Empirical Economics, Springer, vol. 37(3), pages 627-652, December.
    4. Andrade, Eduardo & Laurini, Marcio & Madalozzo, Regina & Valls Pereira, Pedro L., 2004. "Convergence clubs among Brazilian municipalities," Economics Letters, Elsevier, vol. 83(2), pages 179-184, May.
    5. Falko Juessen, 2005. "A distribution dynamics approach to regional income convergence in reunified Germany," ERSA conference papers ersa05p411, European Regional Science Association.
    6. Assaf Razin & Chi-Wa Yuen, 1999. "Optimal International Taxation and Growth Rate Convergence: Tax Competition vs. Coordination," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 6(1), pages 61-78, February.

    More about this item

    Keywords

    LABOUR MOBILITY ; CAPITAL MOVEMENTS ; HUMAN CAPITAL ; EDUCATION ; SUBSIDIES ; INCOME DISTRIBUTION;

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
    • H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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