The Political Economy of Trade and International Labor Mobility

98 Pages Posted: 29 Aug 2018

See all articles by Sebastian Galiani

Sebastian Galiani

University of Maryland - Department of Economics

Gustavo Torrens

Indiana University

Date Written: August 13, 2018

Abstract

We explore the political economy of trade and migration policies in several models of international trade. We show that in a Ricardian world, free trade and no international labor mobility is a Nash equilibrium outcome, but free trade and free international labor mobility is not. The result holds under different assumptions about the set of goods, preferences and the number of countries. An analogous result also holds in multifactor economies such as: a version of the standard two-sector Hercksher-Ohlin model, the Ricardo-Vinner specific factors model, and a three-sector model with a non-tradeable sector. We also study three extensions of our model in which free trade and at least partial labor mobility is a Nash equilibrium outcome. One extension introduces increasing returns to scale. Another an extractive elite. Finally, we allow the recipient country to charge an immigration fee in the form of an income tax and distribute the proceeds among domestic workers, which induces a Pareto improvement for the global economy.

Keywords: International Trade, Labor Mobility, Trade Policy, Migration Policy

JEL Classification: D78, F13, F22

Suggested Citation

Galiani, Sebastian and Torrens, Gustavo, The Political Economy of Trade and International Labor Mobility (August 13, 2018). Available at SSRN: https://ssrn.com/abstract=3230432 or http://dx.doi.org/10.2139/ssrn.3230432

Sebastian Galiani (Contact Author)

University of Maryland - Department of Economics ( email )

College Park, MD 20742
United States

Gustavo Torrens

Indiana University ( email )

Wylie Hall, 100 S Woodland Ave
Bloomington, IN 47405-7104
United States
8128568131 (Phone)

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