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 calibrate 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 occurred between 1989 and 2004, and then the gains and losses from migration which would occur if barriers to labor mobility are reduced. The lower barriers to migration 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.
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Paper provided by Centre for Research and Analysis of Migration (CReAM), Department of Economics, University College London in its series CReAM Discussion Paper Series with number
0905.
Find related papers by JEL classification: F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies F22 - International Economics - - International Factor Movements and International Business - - - International Migration J61 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Geographic Labor Mobility; Immigrant Workers
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