Monday, December 11, 2006

Trade and Labor Mobility

Classical trade models suggest that trade and international labor mobility are substitutes, while other (more modern) models predict that the pressures to migrate increase with freer trade. In the recent economic research, there has been a stronger emphasis on such complementarity rather than substitutability.

I would argue that substitutability between trade and labor mobility dominates in the Armenian economy. Armenia's trade capacity is far from being fully utilized, therefore in the last decade we have observed a steady outflow of labor migrants, both high-skilled and low-skilled.

This question is partially addressed in the forthcoming World Bank publication Migration and Remittances in Eastern Europe and the former Soviet Union. However, empirical studies trying to quantify this link between labor migration and trade flows in our region are non-existent.

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