International Labor Movement and Differences in Per Capital Income

In this paper, we investigate the effects of international labor movement on differences in per capita income between two countries. For this purpose, we use an extended two-country macroeconomic model which allows real consumption wages to affect labor supply flows. We assume one case where two countries have different amounts of initial labor endowment and another case where two countries have different amounts of capital. We show that international labor movement caused by differences in the amount of initial labor endowment makes differences in per capita income smaller. We also show that it is very likely that international labor movement caused by differences in the amount of capital makes differences in per capita income smaller