Is a Policy of Free Movement of Workers Sustainable?
by Tim Worrall and Pierre M. Picard
Published in The Scandinavian Journal of Economics in 2016.
In this paper, we study the costs and benefits of the adoption of a policy of free movement of workers. For countries to agree on uncontrolled movements of workers, short-run costs must be outweighed by the long-term benefits of better labor-market flexibility and income smoothing. We show that such a policy is less likely to be adopted when workers are more impatient and less risk-averse, when production technologies display stronger decreasing returns, and when countries trade a significant share of their products.View Paper