Trade, migration, and welfare : the impact of social capital
Despite the predictions of standard trade theory, countries in the North are not indifferent about free migration and free trade. Migration has become a major concern in some OECD (Organization for Economic Cooperation and Development) countries. But is migration really a threat? If free trade is optional, shouldn't free migration be optimal as well? Why do so many countries advocate free trade but [put]restrictions on international migration? Wellisch and Walz (1998) have shown that there is no inconsistency in advocating free trade at the same time as restricting migration under redistributive policies in the rich countries. The author argues that this holds in the presence of social capital as well. South-North migration affects social capital in both places. The movement of people differs from the movement of goods and services in that people create attachments with those with whom they share social capital (including norms, language, customs, values, and culture) and interact with them at lower cost. So migration generates externalities. The author identifies four types of externalities associated with migration. He examines the impact of trade and migration policies under alternative assumptions about internalizing these externalities and concludes that the South always gains by freeing trade and the North by controlling immigration. These policy recommendations improve the distribution of income by improving the welfare of labor relative to that of capital. Trade liberalization in the South results in higher wages (and social capital) and lower returns to capital. An immigration tax in the North has no impact on capital, but labor gains from collecting the tax (and from higher social capital).
|Date of creation:||31 Jan 1999|
|Contact details of provider:|| Postal: 1818 H Street, N.W., Washington, DC 20433|
Phone: (202) 477-1234
Web page: http://www.worldbank.org/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Helpman, Elhanan, 1984. "Increasing returns, imperfect markets, and trade theory," Handbook of International Economics, in: R. W. Jones & P. B. Kenen (ed.), Handbook of International Economics, edition 1, volume 1, chapter 7, pages 325-365 Elsevier.
- Barro, Robert T. & Sala-I-Martin, Xavier, 1992. "Regional growth and migration: A Japan-United States comparison," Journal of the Japanese and International Economies, Elsevier, vol. 6(4), pages 312-346, December.
- Edward P. Lazear, 1995.
"Culture and Language,"
NBER Working Papers
5249, National Bureau of Economic Research, Inc.
- Galor, Oded & Stark, Oded, 1990. "Migrants' Savings, the Probability of Return Migration and Migrants' Performance," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 31(2), pages 463-467, May.
- Dani Rodrik, 1988. "Imperfect Competition, Scale Economies, and Trade Policy in Developing Countries," NBER Chapters, in: Trade Policy Issues and Empirical Analysis, pages 109-144 National Bureau of Economic Research, Inc.
- Francois, Joseph F, 1994. "Global Production and Trade: Factor Migration and Commercial Policy with International Scale Economies," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 35(3), pages 565-581, August.
- Edward J. Balistreri, 1997. "The Performance of the Heckscher-Ohlin-Vanek Model in Predicting Endogenous Policy Forces at the Individual Level," Canadian Journal of Economics, Canadian Economics Association, vol. 30(1), pages 1-17, February.
- repec:fth:michin:403 is not listed on IDEAS
- Baldwin, Richard & Venables, Anthony J, 1994. "International Migration, Capital Mobility and Transitional Dynamics," Economica, London School of Economics and Political Science, vol. 61(243), pages 285-300, August.
- Faini, Riccardo & Venturini, Alessandra, 1993. "Trade, aid and migrations: Some basic policy issues," European Economic Review, Elsevier, vol. 37(2-3), pages 435-442, April.
- Schaeffer, Peter V, 1995. "The Work Effort and the Consumption of Immigrants as a Function of Their Assimilation," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 36(3), pages 625-642, August.
- Donald R. Davis & David E. Weinstein, 1996.
"Does Economic Geography Matter for International Specialization?,"
Harvard Institute of Economic Research Working Papers
1773, Harvard - Institute of Economic Research.
- Donald R. Davis & David E. Weinstein, 1996. "Does Economic Geography Matter for International Specialization?," NBER Working Papers 5706, National Bureau of Economic Research, Inc.
- Davis, D.R. & Weinstein, D.E., 1997. "Does Economic Geography Matter for International Specialization?," Working Papers 403, Research Seminar in International Economics, University of Michigan.
- Davis, D.R. & Weinstein, D.E., 1997. "Does Economic Geography Matter for International Specialization?," Papers 591, Harvard - Institute for International Development.
- Trefler, Daniel, 1995. "The Case of the Missing Trade and Other Mysteries," American Economic Review, American Economic Association, vol. 85(5), pages 1029-1046, December.
- Andreoni, J., 1993.
"Cooperation in Public Goods Experiments: Kindness or Confusion?,"
9309, Wisconsin Madison - Social Systems.
- Andreoni, James, 1995. "Cooperation in Public-Goods Experiments: Kindness or Confusion?," American Economic Review, American Economic Association, vol. 85(4), pages 891-904, September.
- Paul Cashin & Ratna Sahay, 1996.
"Internal Migration, Center-State Grants, and Economic Growth in the States of India,"
IMF Staff Papers,
Palgrave Macmillan, vol. 43(1), pages 123-171, March.
- Paul Cashin & Ratna Sahay, 1995. "Internal Migration, Center-State Grants and Economic Growth in the States of India," IMF Working Papers 95/66, International Monetary Fund.
- Ruffin, Roy J., 1984. "International factor movements," Handbook of International Economics, in: R. W. Jones & P. B. Kenen (ed.), Handbook of International Economics, edition 1, volume 1, chapter 5, pages 237-288 Elsevier.
- Venables, Anthony J, 1985. "International Trade, Trade and Industrial Policy and Imperfect Competition: A Survey," CEPR Discussion Papers 74, C.E.P.R. Discussion Papers.
- Wellisch, Dietmar & Walz, Uwe, 1998. "Why do rich countries prefer free trade over free migration? The role of the modern welfare state," European Economic Review, Elsevier, vol. 42(8), pages 1595-1612, September.
- Nadeem U. Haque & Se-Jik Kim, 1995. "“Human Capital Flight”: Impact of Migration on Income and Growth," IMF Staff Papers, Palgrave Macmillan, vol. 42(3), pages 577-607, September.
- Panagariya, Arvind & Schiff, Maurice, 1994. "Can revenue maximizing export taxes yield higher welfare than welfare maximizing export taxes?," Economics Letters, Elsevier, vol. 45(1), pages 79-84, May.
- Ramón López & Maurice Schiff, 1998. "Migration and the Skill composition of the Labor Force: The Impact of Trade Liberalization in LDCs," Canadian Journal of Economics, Canadian Economics Association, vol. 31(2), pages 318-336, May.
- George J. Borjas, 1992. "Ethnic Capital and Intergenerational Mobility," The Quarterly Journal of Economics, Oxford University Press, vol. 107(1), pages 123-150.
- Klaus F. Zimmermann, 1995. "Tackling the European Migration Problems," Journal of Economic Perspectives, American Economic Association, vol. 9(2), pages 45-62, Spring.
- Robert S. Chirinko, 1990. "Altruism, Egoism, And The Role Of Social Capital In The Private Provision Of Public Goods," Economics and Politics, Wiley Blackwell, vol. 2(3), pages 275-290, November.
When requesting a correction, please mention this item's handle: RePEc:wbk:wbrwps:2044. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Roula I. Yazigi)
If references are entirely missing, you can add them using this form.