Labor Mobility, Trade, and Social Capital |
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Authors: | Maurice Schiff |
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Affiliation: | The World Bank, Mailstop No. MC3-303, 1818 H. St. NW, Washington, DC 20433, USA. Tel: (202) 473-7963;Fax: (202) 522-1159;E-mail: |
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Abstract: | 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 and 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. |
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