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Department of Economics

Gains from Trade and Migration

  • “Credible Liberalization: Beyond the three theorems of neoclassical welfare economics,” in D. Bös (ed.), Economics in a Changing World, Vol. 3: Public Policy and Economic Organization (IEA Conference Volume No. 109) (London: Macmillan, 1993), ch. 3, pp. 21–39. PDF file of preprint

  • (with Jaume Sempere) “Limits to the Potential Gains from Economic Integration and Other Supply Side Policies,” Economic Journal 105 (1995), 1180–1204.

    Abstract:

    Classical welfare economics demonstrates potential Pareto improvements from “supply side” policy changes that increase the efficiency of aggregate production. Special cases reviewed here concern market integration through customs unions and the gains from international trade. These classical results require incentive incompatible lump-sum transfers. Generally, other policies must compensate deserving losers. Following Dixit and Norman, we consider a freeze of consumer post-tax prices, wages and dividends, with tax rates and producer prices left to clear markets. Actual Pareto improvements are then generated by uniform poll subsidies. With appropriately distributed external tariff revenue, neither international transfers nor free disposal are required. JSTOR link for paper

  • “The International Allocation of Labour,” in Europa, migrazione e lavoro [Europe, Migration and Labour] (Milan: Giuffrè Editore, 2000), pp. 153–161.
    PDF file of preprint

  • (with Jaume Sempere) “Gains from Trade versus Gains from Migration: What Makes Them So Different?” Journal of Public Economic Theory 8 (2006), 145–170.

    Abstract:

    Would unrestricted “economic” migration enhance the potential gains from free trade? With free migration, consumers’ feasible sets become non-convex. Under standard assumptions, however, Walrasian equilibrium exists for a continuum of individuals with dispersed ability to afford each of a finite set of possible migration plans. Then familiar conditions ensuring potential Pareto gains from trade also ensure that free migration generates similar supplementary gains, relative to an arbitrary status quo. As with the gains from customs unions, however, wealth may have to be redistributed across international borders. PDF file of preprint

  • (with Jaume Sempere) “Efficient Migration with Local Public Goods and the Gains from Changing Places.” Stanford University Department of Economics Working Paper No. 05-001 (December 2004)

    Abstract:

    For an economy without public goods, in Hammond and Sempere (2004) we show that, under fairly standard assumptions, freeing migration would enhance the potential Pareto gains from free trade. This paper presents a generalization allowing local public goods subject to congestion. Our new result relies on policies which, unlike in the standard literature on fiscal externalities, fix both local public goods and congestion levels at their status quo values. Such policies allow constrained efficient and potentially Pareto improving population exchanges regulated only through appropriate residence charges, which can be regarded as Pigouvian congestion taxes. PDF file