The Political Economy of Trade and International Labor Mobility

Sebastian Galiani and Gustavo Torrens

No 21274, NBER Working Papers from National Bureau of Economic Research, Inc

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 Heckscher-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.

JEL-codes: F13 F22 (search for similar items in EconPapers)
Date: 2015-06
New Economics Papers: this item is included in nep-int, nep-mig and nep-pol
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Citations: View citations in EconPapers (4)

Published as Sebastian Galiani & Gustavo Torrens, 2021. "The political economy of trade and international labour mobility," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 54(4), pages 1737-1781, November.

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