International Factor Movements

Abstract

The models of trade we have considered so far have had in common the assumption that factors of production cannot move between countries. This is of course a simplification, intended to codify the observation that while factors of production do move internationally, they do so less freely than do goods and services. In this chapter we shall consider some of the causes and consequences of international movements of labour (migration) and capital (foreign investment) when there are no market imperfections. In Chapter 22 we shall consider the role of foreign investment when imperfections in markets lead to the establishment of multinational enterprises.