Migration and Trade in a World of Technological Differences: Theory with an Application to Eastern-Western European Integration

39 Pages Posted: 29 Nov 2007

See all articles by Susana Iranzo

Susana Iranzo

Universitat Rovira i Virgili

Giovanni Peri

University of California, Davis - Department of Economics

Date Written: November 2007

Abstract

Two prominent features of globalization in recent decades are the remarkable increase in trade and in migratory flows between industrializing and industrialized countries. Due to restrictive laws in the receiving countries and high migration costs, the increase in international migration has involved mainly highly educated workers. During the same period, technology in developed countries has become progressively more skill-biased, increasing the productivity of highly educated workers more than less educated workers. This paper extends a model of trade in differentiated goods to analyse the joint phenomena of migration and trade in a world where countries use different skill-specific technologies and workers have different skill levels (education). We calibrate the model to match the features of the Western European countries (EU-15) and the new Eastern European members of the EU. We then simulate the effects of freer trade and higher labor mobility between the two regions. Even in a free trade regime the removal of the restrictions on labor movements would benefit Europe as a whole by increasing the GNP of Eastern and Western Europe. Interestingly, we also find that the resulting skilled migration (the so-called "brain drain") from Eastern European countries would not only benefit the migrants but, through trade, could benefit the workers remaining in Eastern Europe as well.

Suggested Citation

Iranzo, Susana and Peri, Giovanni, Migration and Trade in a World of Technological Differences: Theory with an Application to Eastern-Western European Integration (November 2007). NBER Working Paper No. w13631. Available at SSRN: https://ssrn.com/abstract=1033757

Susana Iranzo

Universitat Rovira i Virgili ( email )

Tarragona
Spain

Giovanni Peri (Contact Author)

University of California, Davis - Department of Economics ( email )

One Shields Drive
Davis, CA 95616-8578
United States
530-752-3033 (Phone)
530-752-9382 (Fax)

Register to save articles to
your library

Register

Paper statistics

Downloads
32
Abstract Views
418
PlumX Metrics