How does labor mobility affect income convergence?

Abstract

Labor mobility is introduced into the neoclassical growth model. For a small open economy with capital intensity below its steady-state level, outmigration directly contributes to faster income convergence but also creates a disincentive for gross capital investment. At low relative income levels, the latter disincentive effect tends to dominate so that labor mobility can actually slow the speed of income convergence. © 2004 Elsevier B.V. All rights reserved.