| Jordan M. Rappaport, Federal Reserve Bank of Kansas City |
| How Does Labor Mobility Affect Income Convergence? |
| Session: C-4-5 Saturday 12 August 2000 by Rappaport, Jordan M. |
| The neoclassical growth model is extended to allow for mobile labor. Following a negative shock to a small economy's capital stock, capital and labor frictions effect an equilibrium transition path during which wages remain below their steady-state level. Outmigration directly contributes to faster income convergence but also creates a disincentive for gross capital formation. The net result is that across a wide range of calibrations, the speed of income convergence is relatively insensitive to the degree of labor mobility. |
| Submitted paper full-text in .pdf |