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Journal of Economic Integration 2007 March;22(1) :50-68.
International Migration of Labor, Efficiency Wages, and Monetary Policies

Akira Shimada 

Nagasaki University
Copyright ©2007 Journal of Economic Integration

Assuming a symmetric two-country economy with labor migration and efficiency wages, we investigate which of the two regimes, non-cooperation or intergovernment cooperation, is advantageous. We show that not only the utility of the policy authority but also that of the workers is higher under inter-government cooperation than under non-cooperation, provided that migration flows are sufficiently sensitive to changes in real-consumption wage differentials. Our result is in contrast to the one derived by Agiomirgianakis (1998); according to him, in a two-country economy with labor migration and labor unions, only the policy authority can attain the higher utility under inter-government cooperation.

JEL classification:F42, F22, J41, F41

Keywords: Monetary policy games | International migration of labor | Efficiency wages | Two-country economy
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