| Abstract: | This paper studies the connection between social security policy and international factor movements within a two-country overlapping-generations model with production. Incentives for factor movements emerge because one country relies on private savings while the other country operates a social security system. The pattern of migration depends on the steady-state capital–labor ratios compared with the Golden Rule capital–labor ratios. Incentives to migrate do not vanish in the long run and one country might empty out. Capital always moves to the social-security country. Without compensation neither labor nor capital mobility represents a Pareto improvement for the economy. |
