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Migration and Trade: Theory with an Application to the Eastern-Western European Integration

Author

Listed:
  • Giovanni Peri
  • Susana Iranzo

    (Department of Economics, University of California Davis)

Abstract
The remarkable increase in trade flows and in migratory flows of highly educated people are two important features of globalization of the last decades. This paper extends a two-country model of inter- and intra-industry trade to a rich environment featuring technological differences, skill differences and the possibility of international labor mobility. The model is used to explain the patterns of trade and migration as countries remove barriers to trade and to labor mobility. We parameterize the model to match the features of the Western and Eastern European members of the EU and analyze first the effects of the trade liberalization which occured between 1989 and 2004, and then the gains and losses from migration which are expected to occur if legal barriers to labor mobility are substantially reduced. The lower barriers to migration would result in significant migration of skilled workers from Eastern European countries. Interestingly, this would not only benefit the migrants and most Western European workers but, via trade, it would also benefit the workers remaining in Eastern Europe.

Suggested Citation

  • Giovanni Peri & Susana Iranzo, 2009. "Migration and Trade: Theory with an Application to the Eastern-Western European Integration," Working Papers 81, University of California, Davis, Department of Economics.
    • Handle: RePEc:cda:wpaper:81
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    References listed on IDEAS

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    More about this item

    Keywords

    Skilled Migration; Gains from Variety; Real Wages; Eastern-Western Europe.;
    All these keywords.

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration
    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers

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