migration in the new Europe

Diane Monaco dmonaco at pop3.utoledo.edu
Thu May 2 13:28:21 PDT 2002


At 12:47 PM 5/2/2002 -0500, you wrote:
>Diane,
>
>Can you help me out with some elaboration here? I've long had a gut sense
>that an international trade regime in which capital is mobile but labor is
>immobile works to the disadvantage of workers, but the simple models
>(i.e., the ones I understand!), at least, don't work that way. Perhaps it
>has to do with immobile labor getting stuck in economies mired in an
>efficiency wage trap, or some other low-level equilibrium? (Inadequate
>state capacity to provide essential infrastructure?) Or is it simply a
>reflection of the price wedge - much higher for wages than for
>profits? Where do you advise me to go to understand this tangle a bit better?

Sure Michael, I'm glad to do what I can to help. I think the best single source is the textbook INTERNATIONAL TRADE: THEORY AND EVIDENCE BY Markusen and Melvin. Please note that there is a newer (1995) version of this text by Markusen, Melvin, Kaempfer, and Maskus, that IMHO does not do as good a job with international factor movements as the older text. Anyway, in the older text the authors use a simple analysis involving the value of the marginal product of labor/capital (VMP) for countries that I even use with my undergraduate students. The area under the country's VMP curve at equilibrium can be thought of as net domestic income for the entire country which makes the assessment of gains/losses to labor and capital before and after movements easy. Most of the gains really come from deadweight costs that arise from labor not being able to move to where it is valued highest.

I would also recommend almost anything written on the topic by James Markusen. I think he is one of the best international trade economists around today on par with Paul Krugman [and guys please don't throw any rotten tomatoes and eggs at me :)]. Good luck!

Best, Diane



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