Why do rich countries prefer free trade over free migration? The role of the modern welfare state
TL;DR: Social welfare in countries with a relatively small number of low-skilled native workers is higher with free trade than with free migration due to redistribution of income towards immigrating workers.
About: This article is published in European Economic Review.The article was published on 1998-09-01. It has received 89 citations till now. The article focuses on the topics: Free trade & Free migration.
Citations
More filters
TL;DR: This paper proposed a conceptual framework on the internal dynamics of migration processes by elaborating a set of hypotheses on the various migration-facilitating and migration-undermining feedback mechanisms at play in the various trajectories and stages of migration system formation and decline.
Abstract: The migration literature has identified various feedback mechanisms which explain why, once started, migration processes tend to become partly self-perpetuating, leading to the formation of migrant networks and migration systems. However, existing theories on the internal dynamics of migration processes are characterised by three fundamental weaknesses. First, their focus on migrant networks coincides with a neglect of indirect feedback dynamics that operate through the impact of migration on the sending and receiving contexts, changing the initial conditions under which migration takes place. Second, existing theories are unable to explain why most initial migration moves do not lead to network migration and migration system formation. Third, their largely circular logic reveals an inability to conceptualise which migration-undermining feedback mechanisms may counteract migration-facilitating feedback dynamics and which may explain the endogenous decline of established migration systems. By drawing on various disciplinary strands of migration theory and by applying insights from the critical social capital literature, this paper proposes a conceptual framework on the internal dynamics of migration processes by elaborating a set of hypotheses on the various migration-facilitating and migration-undermining feedback mechanisms at play in the various trajectories and stages of migration system formation and decline.
420 citations
Cites background from "Why do rich countries prefer free t..."
...In a perfectly neoclassical world, this process of ‘factor price equalisation’ (the Heckscher Ohlin model) will lead to growing convergence between wages at the sending and receiving ends (Massey et al. 1993; Wellisch and Walz 1998), which will eventually remove migration incentives....
[...]
Posted Content•
TL;DR: In this article, the authors selectively review recent literature on illegal migration from Mexico to the United States and examine the composition of legal and illegal populations and the time-series covariates of illegal labor flows.
Abstract: In this paper, I selectively review recent literature on illegal migration from Mexico to the United States. I begin by discussing methods for estimating stocks and flows of illegal migrants. While there is uncertainty about the size of the unauthorized population, new data sources make it possible to examine the composition of legal and illegal populations and the time-series covariates of illegal labor flows. I then consider the supply of and demand for illegal migrants. Wage differentials between the United States and Mexico are hardly a new phenomenon, yet illegal migration from Mexico did not reach high levels until recently. An increase in the relative size of Mexico%u2019s working-age population, greater volatility in U.S.-Mexico relative wages, and changes in U.S. immigration policies are all candidate explanations for increasing labor flows from Mexico. Finally, I consider policies that regulate the cross-border flow of illegal migrants. While U.S. laws mandate that authorities prevent illegal entry and punish firms that hire unauthorized immigrants, these laws are imperfectly enforced. Lax enforcement may reflect political pressure by employers and other interests that favor open borders.
339 citations
Posted Content•
TL;DR: A review of industrial policy in three non-Asian settings El Salvador, Uruguay, and South Africa highlights the extensive amount of industrial policies that is already being carried out and frames the need for industrial policies in the specific circumstances of individual countries as discussed by the authors.
Abstract: The theoretical case for industrial policy is a strong one. The market failures that industrial policies target in markets for credit, labor, products, and knowledge have long been at the core of what development economists study. The conventional case against industrial policy rests on practical difficulties with its implementation. Even though the issues could in principle be settled by empirical evidence, the evidence to date remains uninformative. Moreover, the conceptual difficulties involved in statistical inference in this area are so great that it is hard to see how statistical evidence could ever yield a convincing verdict. A review of industrial policy in three non-Asian settings El Salvador, Uruguay, and South Africa highlights the extensive amount of industrial policy that is already being carried out and frames the need for industrial policy in the specific circumstances of individual countries. The traditional informational and bureaucratic constraints on the exercise of industrial policy are not givens; they can be molded and rendered less binding through appropriate institutional design. Three key design attributes that industrial policy must possess are embeddedness, carrots-and-sticks, and accountability.
279 citations
TL;DR: In this article, the authors selectively review recent literature on illegal migration from Mexico to the United States and examine the composition of legal and illegal populations and the time-series covariates of illegal labor flows.
Abstract: In this paper, I selectively review recent literature on illegal migration from Mexico to the United States. I begin by discussing methods for estimating stocks and flows of illegal migrants. While there is uncertainty about the size of the unauthorized population, new data sources make it possible to examine the composition of legal and illegal populations and the time-series covariates of illegal labor flows. I then consider the supply of and demand for illegal migrants. Wage differentials between the United States and Mexico are hardly a new phenomenon, yet illegal migration from Mexico did not reach high levels until recently. An increase in the relative size of Mexicos working-age population, greater volatility in U.S.Mexico relative wages, and changes in U.S. immigration policies are all candidate explanations for increasing labor flows from Mexico. Finally, I consider policies that regulate the cross-border flow of illegal migrants. While U.S. laws mandate that authorities prevent illegal entry and punish firms that hire unauthorized immigrants, these laws are imperfectly enforced. Lax enforcement may reflect political pressure by employers and other interests that favor open borders.
260 citations
TL;DR: For example, the authors show that immigration flows, with the average characteristics of the last 15 to 20 years' immigration, have tended not to be to the advantage of natives while advantageous for immigrants.
212 citations
References
More filters
Book•
[...]
01 Jan 1991
TL;DR: Paul Krugman as mentioned in this paper argues that the location of production in space is a key issue both within and between nations and provides a stimulating synthesis of ideas in the literature and describes new models for implementing a study of economic geography that could change the nature of the field.
Abstract: "I have spent my whole professional life as an international economist thinking and writing about economic geography, without being aware of it," begins Paul Krugman in the readable and anecdotal style that has become a hallmark of his writings. Krugman observes that his own shortcomings in ignoring economic geography have been shared by many professional economists, primarily because of the lack of explanatory models. In Geography and Trade he provides a stimulating synthesis of ideas in the literature and describes new models for implementing a study of economic geography that could change the nature of the field.Economic theory usually assumes away distance. Krugman argues that it is time to put it back - that the location of production in space is a key issue both within and between nations.Paul Krugman is Professor of Economics at the Massachusetts Institute of Technology. He has been a consultant to the International Monetary Fund, the World Bank, the United Nations, the Trilateral Commission, and the U.S. State Department. He is a member of the Group of Thirty. His books include the recent bestselling Age of Diminished Expectations: U.S. Economic Policy in the 1990s.
6,124 citations
Book•
01 Jan 1985
3,279 citations
"Why do rich countries prefer free t..." refers background in this paper
...allocation when goods and factors are perfectly mobile (see e.g. Helpman and Krugman, 1985 )....
[...]
...It is a well-known result in the trade literature (see, e.g., Dixit and Norman, 1980; Helpman and Krugman, 1985 ) that free trade replicates the integrated equilibrium with factor prices being equalized across countries....
[...]
TL;DR: In this article, the authors consider a model in which an imperfectly competitive manufacturing sector produces goods which are used both for final consumption and as intermediates, and they show that when transport costs fall below a critical value, a core-periphery pattern forms spontaneously, and nations that find themselves in the periphery suffer a decline in real income.
Abstract: The paper considers a model in which an imperfectly competitive manufacturing sector produces goods which are used both for final consumption and as intermediates. Intermediate usage creates cost and demand linkages between firms and a tendency for manufacturing agglomeration. How does globalization affect the location of manufacturing and the gains from trade? At high transport costs all countries have some manufacturing industry, but when transport costs fall below a critical value a core-periphery pattern forms spontaneously, and nations that find themselves in the periphery suffer a decline in real income. As transport costs continue to fall there comes a second stage of convergence in real incomes, in which the peripheral nations gain and the core nations may well lose.
2,522 citations
"Why do rich countries prefer free t..." refers background in this paper
...This complementarity also results in models of economic geography due to agglomeration effects (see Krugman, 1991; Krugman and Venables, 1995; Walz and Wellisch, 1996a)....
[...]
2,466 citations
Book•
01 Jan 1980
TL;DR: In this article, the authors expound trade theory emphasizing that a trading equilibrium is general rather than partial, and is often best modelled using dual or envelope functions, and give unified treatments of comparative statics and welfare, sheds new light on the factor-price equalization issue, and treats the modern specific-factor model in parallel with the usual Heckscher-Ohlin one.
Abstract: This book expounds trade theory emphasizing that a trading equilibrium is general rather than partial, and is often best modelled using dual or envelope functions. This yields a compact treatment of standard theory, clarifies some errors and confusions, and produces some new departures. In particular, the book (i) gives unified treatments of comparative statics and welfare, (ii) sheds new light on the factor-price equalization issue, (iii) treats the modern specific-factor model in parallel with the usual Heckscher-Ohlin one, (iv) analyses the balance of payments in general equilibrium with flexible and fixed prices, (v) studies imperfect competition and intra-industry trade.
1,233 citations