The Economic Implications of Liberalising Mode 4 Trade

1
The Economic Implications of Liberalising Mode 4
Trade

• L Alan Winters
• University of Sussex

2
Approaches to TMNP

• The polar forms
• International trade models
• International migration models
• Intermediate approaches
• sectoral studies
• business plan model

3
Trade Models

• scale
• specialisation
• technology
• competition

• high barriers
• threat to competition
• pervasiveness of services
• size of services

4
Trade and Factor Rewards

• factor price equalisation
• trade and migration are substitutes
• BUT wage differences could persist
• productivity
• scale
• taxes
• more factors than goods complete specialisation
  factor intensity reversals

5
Migration Models

• TMNP is NOT permanent migration
• but labour forces change similarly
• especially in revolving door TMNP

6
Wages before Mobility
WB
MPLA
MPLB
WA
OB
OA
L0
7
Wages after Mobility
WB
MPLA
a
W
b
MPLB
c
WA
OB
OA
L0
L1
8
Winters
WN WS
1/4
LN
M0
M1
9
Quantifying the Barriers

• wage in S
• additional costs of supply
• transport, accomodation, visas, registration
• QRs
• excessive regulation
• immigration controls
• price comparisons - difficult even under easier
  conditions

10
Business Plan Model
WN WSC WS
LN
M0
M1
11
Business Plan Model
WN WSC WS
LN
M0
M1
12
Intersectoral Mobility

• wages across sectors are either
• (a) rigidly related
• because of perfect mobility
• (b) quite independent
• because refer to quite separate factors
• for long run (a) is pretty good
• search is for intermediate position

13
Walmsley and Winters

• standard CGE model - GTAP
• perfect competition, no externalities
• modify for TMNP

14
Temporary and Permanent Workers
Host Country

• Home Country
• LFm PLm
• TM TW
• PLs LFs

Allocation Module
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Allocation of Temporaries
Home region 1
Pool Supply of Temporary Migrants Demand for
Temporary Workers
Host region 1
Host region N
Home region N
Sector J
Sector 1
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The Experiment

• quotas increased by 3 of host work force
• skilled and unskilled separately
• supplied by labour exporters pro rata to work
  forces
• Table 1 gives flows
• USA 2.7m unskilled 2.4m skilled
• China -2.4m unskilled -.5m skilled

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Host vs Home ConceptsLabour Flow from A to B
Income
Host
Home
Source
Concept
Concept
PL
B
B
B
K
B
B
B
T
T
TL
retained
B
A
B
TL
remitted
A
A
B
PL
A
A
A
K
A
A
A
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Table 3 Economic Welfare
II
III
IV
V
VI
Welfare of
Welfare of
Welfare of
Welfare
Welfare
temporary
temporary
permanent
by home
by host
b
residents
Workers
Migrants
region
region
III IV
II IV
Deved
175960
68577
6982
75559
182942
Co.s
Deving
-5002
98984
-20685
78301
-25688
Co.s
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Table 4 Percentage Changes
II
III
IV
V
VI
change
change
Change
Change
Change
in Real
in Real
in Rental
in Real
in Terms
c
Wage of
Wage of
Price of
GDP
of Trade
Skilled
Unskilled
Capital
Labour
Labour
Deved
-1.02
-0.61
0.78
1.05
-0.24
Co.s
Deving
5.13
0.12
-0.52
-0.91
0.53
Co.s
20
Table 5 Skilled vs Unskilled Liberalisation
II
III
IV
V
VI
VII
Welfare of
Welfare of
Welfare of
Welfare of
Welfare of
Welfare of
permanent
permanent
temporary
temporary
home
home
workers
workers
migrants
migrants
region
region
(unskilled)
(skilled)
(unskilled)
(skilled)
(unskilled)
(skilled)
II IV
III V
Deved
6,860
121
50,587
17,989
57,447
18,111
Co.s
Deving
13,097
-33,781
37,676
61,309
50,773
27,528
Co.s