Trading Goods or Human Capital: The Gains and Losses from Economic Integration

Abstract In this paper, I quantify the economic consequences of liberalizing migration in the OECD and compare them with those of a hypothetical liberalization of trade across the OECD. First, I investigate the bilateral migration and trade agreements between the EU and Australia, Canada, Japan, Turkey, and the US. Second, I show that the overall impact of reducing all legal restrictions on migration in the OECD is moderate (1.6 percent in real GDP), while the gains from removing tariff and non‐tariff barriers to trade among all of the OECD economies are slightly lower (1.1 percent in real GDP). Finally, both the theoretical and numerical findings suggest that the direction of relationships between trade and migration (either substitutability or complementarity) depends on the type of shock imposed in the system.