Date of Award

1988

Document Type

Dissertation

Degree Name

Doctor of Philosophy (PhD)

Department

Economics

First Advisor

Eden S. H. Yu

Abstract

This dissertation presents an intertemporal model with two degrees of endogenously determined labor mobility: complete immobility in the short run and partial mobility in the long run. It examines the impact on welfare when, in response to a change in an exogenous variable, the nation adjusts its output ratio. The movement of factors between sectors is necessary but in the case of labor, that does not take place at first because of labor's slowness in responding to a developing wage differential. The consequent contraction of the product transformation curve is welfare reducing. Uncertainty about the future terms of trade is introduced to see if that alters the results obtained in a certain environment. Chapter III includes three types of growth: an increase in the labor supply, increase in the supply of capital and neutral technological innovation. Growth was found to be either welfare improving or immiserizing depending on the degree of labor mobility plus the sizes of the elasticities of factor substitution and the value and physical intensities of production. For a large country the terms of trade effect was incorporated in determining the total impact on welfare. Uncertainty about the future price ratio did not reverse the qualitative findings in a certain environment. Chapter IV covers two customs union alternatives for the home country, one trade creating and the other trade diverting. It was found that labor immobility could cause a trade creating union to be welfare reducing while a welfare improvement might occur in an uncertain environment with a trade diverting union in spite of some labor immobility. In Chapter V the impact of a unilateral transfer was analyzed from the perspective of the donor and recipient. With some degree of labor immobility there can be a normal result, a weak or strong paradox. If the certainty of the transfer reduces uncertainty about the future terms of trade it may be welfare improving for both. The objective of the intertemporal model is to add subtlety to trade theory in the treatment of immobility of labor and give it greater scope for utilization.

Pages

156

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