Policy Toward International Capital and Labor Flows under Free Trade and Complete Specialization

Policy Toward International Capital and Labor Flows under Free Trade and Complete Specialization

In a developed free trade environment, a plausible outcome is that different countries specialize in production of different commodities. This study examines a country`s optimal policy toward international flows of labor and capital in a model where the trading countries completely specialize in production of different commodities and no restriction on commodity trade exists. Under variable terms of trade, the results demonstrate the interdependence between optimal policies a country toward international flows of labor and capital.

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