Labor Market Integration, Unemployment, and Transfers

Antonio Spilimbergo

Review of International Economics, 1999, vol. 7, issue 4, 641-50

Abstract: Integration of the labor markets between a rich country (North) and a poor country (South) often leads to high unemployment in the South and transfers from North to South; for instance: United States versus Puerto Rico, West versus East Germany, Northern versus Southern Italy. This paper presents a general equilibrium model in which workers finance a transfer to the unemployed in the South in order to limit migration. In addition, it extends the framework to consider: the difference in efficiency between natives and immigrants, taxes on fixed factors in the North with internal transfers, and subsidies to the employed in the South. Copyright 1999 by Blackwell Publishing Ltd.

Date: 1999
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