Factor Mobility, Regional Development, and the Distribution of Income

Abstract

JSTOR is a not-for-profit service that helps scholars, researchers, and students discover, use, and build upon a wide range of content in a trusted digital archive. We use information technology and tools to increase productivity and facilitate new forms of scholarship. For more information about JSTOR, please contact support@jstor.org.. The University of Chicago Press is collaborating with JSTOR to digitize, preserve and extend access to Journal of Political Economy.A three-factor model of a small country or region is used to analyze the general equilibrium consequences of three frequently advocated regional development policies-investment subsidies, migration incentives, and educational expenditures. The analysis focuses on policy-induced changes in absolute and relative factor earnings. The results link changes in the distribution of income to the degree of complementarity and substitutability among factors of production and to the pricing scheme adopted by educational institutions. Programs intended to aid lagging regions may produce perverse results, particularly if the cost of education is the same to all individuals regardless of ability.The existence of mobile factors has important consequences for the effectiveness of regional development policies. Increased mobility of capital and skilled labor has substantially altered the possibilities of achieving social and economic objectives through allocational incentives. Moreover, policies designed to promote these objectives may generate unintended distributional shifts as a result of induced factor flows.'In this paper, a one-sector model of a small country or region is used to analyze the general equilibrium consequences of three frequently advocated regional development policies-investment subsidies, migration incentives, and educational expenditures. The analysis focuses on policyinduced changes in absolute and relative factor earnings.2 Capital is The authors gratefully acknowledge the support of National Science Foundation grant no. SOC74-19459. Christopher Clague, Frank Flatters, Edwin Truman, and anonymous referees provided useful comments on earlier drafts. 1 See, esp., Cooper 1968 and 1974. 2 Most other writers have emphasized changes in total or per capita income rather than its distribution among factors; see, e.g., Johnson 1967; one exception is Mishan and Needleman 1968. However, possibilities for redistribution of income are generally limited, so that changes in factor earnings are an important policy concern.8o JOURNAL OF POLITICAL ECONOMY treated as perfectly mobile, an assumption suggested by the growing importance of interregional and international investment flows. Skilled labor is assumed to be mobile within limits imposed by the costs of migration; unskilled labor is assumed to be immobile. The decision to treat only skilled labor as mobile is motivated by current immigration regulations in the United States and some other developed countries, which effectively limit immigration to those with needed skills. Even within developed economies...

Welfare-theoretical analyses of the brain drain

“…The paper which most closely approximates the other dynamic models previously discussed is McCulloch-Yellen (1974) proportions and the fraction of those newly-born getting educated, and the rate of population growth. * * Denote by S,U and P = S+U the skilled, unskilled and total population, by g and e the gross rate of population growth and the fraction of those just born getting education, and finally by m the ratio of skilled migrants to total population.…”

“…Neither of the two papers in this area, McCulloch-Yellen (1974) and Rodriguez (1975b), however, could be described as a straightforward threefactor extension of the models analyzed so far. The main differences are:…”

Migration selectivity and the evolution of spatial inequality

“…The idea that education investments are impacted by migration prospects is not new, however, and may be traced back in the brain drain literature at least to McCullock and Yellen (1977). The novelty lies in the introduction of uncertainty into the migration process, which creates the possibility of a gain for the source country.…”

Emigração de quadros, formação superior e desenvolvimento: o caso de Moçambique

“…Na década seguinte, essas conclusões foram criticadas e salientaram-se os efeitos negativos da fuga de cérebros para os países de origem. Argumentava-se que esse tipo de migrações contribuía para acentuar as disparidades entre os países ricos e pobres Hamada, 1974;1975;Rodriguez, 1975;Rodriguez, 1975;McCulloch;Yellen, 1977). Essa visão pessimista começou a ser alterada em meados dos anos 1990 quando começaram a ressurgir estudos a destacar os efeitos positivos da fuga de cérebros 1 .…”