The Gains from International Factor Movements
1983 (English)Report (Other academic)
In this paper I study the welfare gains from free and restricted international movement of factors in the presence of free and restricted trade in goods. In moving from an equilibrium with trade in goods and no factor movements to one with goods trade and free factor mobility, a sufficient condition for welfare imporvemnet is that the sum of a "terms-of-trade" effect and a "volume-of-trade" effect be non-negative. The maintenance of optimal tariffs and export subsidies on goods in the cum-factor-movements equilibrium is not sufficient to ensure gains from free factor trade. Finally, some movement of factors is not necessarily better than none, in the sense that a prohibitive tax on factor trade may be called for, both in a second-best optimum, when government is sonctrained to follow sub-optimal policy with respect to goods trade, and in a first-best optimum, when trade taxes are also set optimally.
Place, publisher, year, edition, pages
Stockholm: IIES , 1983. , 20 p.
Seminar Paper / Institute for International Economic Studies, Stockholm University, ISSN 0347-8769 ; 256
IdentifiersURN: urn:nbn:se:su:diva-41494OAI: oai:DiVA.org:su-41494DiVA: diva2:330682
Published in connection with a visit at the IIES.2010-07-192010-07-192010-07-19