Interactions between growth economies: Migration and trade

This dissertation considers the impact of international migration and international trade on the economies of rich and poor countries.; The first chapter considers international migration. This chapter develops a theoretical model based on realistic assumptions of international migration such as the heterogeneity of and private information on agent types. The model demonstrates the possibility of the existence of multiple migration equilibria in the poor country if the country is above a threshold poverty level. The source of multiple equilibria is the strategic complementarity and failure in coordinating actions of a large number of agents. If the poor country is below the poverty threshold, only the migration equilibrium occurs where all high quality human capital migrates to the rich country. Migration always increases welfare of the rich country, and reduces the welfare of low type agents in the poor country. The welfare of migrants depends on whether the poor country is above or below a "critical poverty level". This leads to different policy options for the poor country depending on its level of poverty.; In the second chapter, the impact of trade between developing and developed countries on growth rates and per capita income levels is investigated. In the model agents accumulate human capital through intentional investment of time. There also exist knowledge spillovers from the developed to the developing country resulting from trade. Under those assumptions the developing country grows faster than developed country as a result of trade. Furthermore, the lower the initial level of human capital in the developing country, the faster the developing country will grow during the transition to a long-run equilibrium. In the long-run, both countries will converge to autarky growth rate. The model also reveals that although growth is faster, the developing country will have a lower level of per capita income if its population growth is higher than the population growth of the developed country. However, when population growth rates in the two countries are similar, it is possible for the developing country to catch up with or even exceed the per capita income level of the developed country.