Gains from Trade versus Gains from Migration: What Makes Them So Different?
Latest revision: September 1998. Previous versions appeared under the titles "On Proving Gains from Trade and Migration," and "On the Contrast between Policies toward Trade and Migration." Would unrestricted "economic" migration enhance the potential gains from free trade? First, with free migration feasible sets become non-convex. Under standard assumptions, however, Walrasian equilibrium exists for a continuum of individuals with dispersed ability to afford each of a finite set of possible migration plans. Then familiar conditions ensuring potential Pareto gains from trade also ensure similar supplementary gains from free migration. Second, unlike the standard literature on fiscal externalities, here appropriate policies for providing national public goods, especially those subject to congestion, allow potential Pareto improvements from population exchanges that are regulated only through appropriate residence charges.
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