The Macroeconomics of Open Economies Under Labour Mobility

George M Agiomirgianakis

• Publisher: Routledge
• Year: 2019
• Print ISBN: 9781138337237
• eBook ISBN: 9780429809309
• Topic: Business
• Subtopic: Business General
• Index: Business

First published in 1999, this study recognises the importance of international labour mobility for modern economics. This is in large part due to its effects on the size, age structure and skills of the labour force, the human flow between countries and the expected rise in scale as a result of income differentials, demographic pressures and differential labour-force growth rates along with developments in transport and communications. These migrations are increasingly volatile and unpredictable, whilst being concentrated in regions like Australia, the USA, Sub-Saharan Africa and Western Europe. Given the extensive literature on the microeconomic view, George M. Agiomirgianakis aims to extend the debate on open economy macroeconomics through an exploration of international labour mobilities and their effects on open economies with flexible exchange rates.

1 International Mobility of Labour and Monetary Policy in a Small Open Economy

1 Introduction

Most of the existing literature on international labour mobility (ILM) deals with either the causes of labour mobility or the ‘welfare effects’ of labour mobility, that is, the question of whether international mobility of labour will depress the wages of the host country or whether there will be some benefit for the sending country (see, for example, Greenwood, 1969; Djajic, 1985; Rivera-Batiz, 1989; Quibria, 1989; Brecher and Choudhri, 1987, 1990; Abowd and Freeman, 1991; Borjas and Freeman, 1992; Nikas, 1992; Ichino, 1993; De New and Zimmerman, 1993a and b; Freeman, 1993). This literature often relies on ad hoc assumptions regarding the workers motives for moving from one job to another: authors either incorporate in their analysis several social and economic variables (gravity models) (see e.g. Greenwood, 1969; Stark, 1991; Abowd and Freeman, 1991; Zimmermann, 1992; Faini and Venturini, 1993; Vijverberg, 1993) or employ models which are based on the assumption that labour mobility depends upon expected real income differences (see e.g. Rodriguez, 1976; Djajic, 1989; Borjas, 1991; Stark, 1991; Burda and Wyplosz, 1992, 1993; Baldwin and Venables, 1993; Dolado, 1993). Moreover, none of these studies has incorporated the possibility of international labour mobility into a macroeconomic framework.

The purpose of this chapter is to incorporate the possibility of international labour mobility into a macro model of a small open economy with a flexible exchange rate and a competitive labour market and explore its role in the adjustment of the economy to monetary-policy changes. While the bulk of the literature on exchange rate dynamics assumes capital mobility, most studies make the assumption of no international mobility of labour (see e.g. Dornbush, 1976; Sachs, 1980; Driskill and McCafferty, 1987; Ahtiala, 1989; Devereux and Purvis, 1990). This chapter can be viewed as an attempt to extend the international macroeconomics literature by taking account of the possibility of international labour mobility. Indeed, two issues are addressed: first, what are the macroeconomic implications of monetary expansions under ILM; and, second, how the presence of ILM affects exchange-rate variability following unantic...

Table of contents

• Cover
• Half Title
• Dedication
• Title Page
• Copyright Page
• Table of Contents
• List of Figures
• List of Tables
• Acknowledgments
• Introduction
• 1 International Mobility of Labour and Monetary Policy in a Small Open Economy
• 2 Transmission of Fiscal Disturbances Between Countries and International Migration
• 3 International Mobility of Labour, Capital Accumulation and Unanticipated Shocks
• 4 Trade Union Behaviour and International Migration of Labour
• 5 International Migration of Labour and Monetary Policy Games
• References