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CHAPTER 15 MULTINATIONALS AND MIGRATION: INTERNATIONAL FACTOR MOVEMENTS Objectives of the Chapter A necessary condition for world output to be maximized is the free mobility of factors of production to the places where their productivity—and so, presumably, income—are the highest. This is relatively uncomplicated within nations. Factor movements between nations are an entirely different matter. In fact, many countries wrestle with whether to encourage factor migration or to restrict it. As we have seen with international trade in goods, we will find that not everyone benefits from the international migration of factors of production. Chapter 15 explores the motives for, and implications of, the movement of capital and labor across national borders. It is important to remember, however, that the economic analysis of these flows must be supplemented by sociological and political considerations in order to understand the different treatment of internal versus international factor migration. After studying Chapter 15, you should be able to 1. describe the historical and geographical patterns of foreign direct investment. 2. explain why a firm might choose a policy of FDI in a host country over one of exporting goods produced in the home country. 3. analyze the welfare effects of FDI in both the home and host countries, and describe how the choice to subsidize or tax FDI depends on considerations of market power, externalities, and politics. 4. illustrate and explain the welfare effects of labor migration on both the sending country and the receiving country. 5. discuss the positive and negative externalities generated by international migration. 6. relate the economic and political outcomes of immigration for the emigrants and for the residents of the receiving country. Important Concepts Brain drain: The emigration, mainly from developing countries, of highly skilled and educated people to higher-wage industrialized countries.
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This note was uploaded on 02/18/2010 for the course ECON 343 taught by Professor Dblack during the Fall '09 term at University of Delaware.

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