Labor Mobility, Trade and Social Capital
Labor market integration raises welfare in the absence of distortions. This paper examines labor and goods market integration in a general equilibrium model with social capital. The findings are: i) labor market integration has an ambiguous impact on welfare, and raises it if the goods produced and the labor skills are sufficiently different; ii) compared to Pareto optimum, labor mobility (social capital) is excessively large (depleted); iii) trade is superior to labor market integration if trading costs are no higher than private migration costs; otherwise the outcome is ambiguous; and iv) the creation of new institutions in response to labor market integration has an ambiguous impact on welfare.
|Date of creation:||Feb 2004|
|Date of revision:|
|Publication status:||published in: Review of International Economics, 2004, 12 (4), 630-642|
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