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Trading Goods or Human Capital The Winners and Losers of Economic Integration

Michał Burzyński ()

No 2014022, Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) from Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES)

Abstract: The paper investigates the welfare consequences of liberalizing migration and trade between the OECD countries. The key findings are that the aggregate welfare gains from zeroing the trade barriers in OECD are moderate (+ 1,5% in real GDP), whereas the impact of reducing the barriers for migration in OECD is substantially more pronounced (+ 2,0% in real GDP). Removing trade barriers is beneficial for every country in our sample (especially for the less integrated economies), whereas eliminating migration barriers provides positive outcomes for only a few destinations and increases the between and within-country inequality. Consequently, liberalizations of trade and migration have similar implications for aggregate welfare, but very different distributive effects across the OECD countries. Furthermore, we consider bilateral liberalization scenarios between the EU and the US as well as between the EU and Turkey, which are of major importance in the current political debates. As a by-product of our numerical experiments, we examine the relations between trade and migration, concluding that their sign and magnitude extensively depend on the type of shock imposed in a general equilibrium system.

Keywords: migration; international trade; computational general equilibrium; liberalization (search for similar items in EconPapers)
JEL-codes: C68 F22 J24 (search for similar items in EconPapers)
Pages: 55
Date: 2014-11-18
New Economics Papers: this item is included in nep-int and nep-mig
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