Free-Trade Agreements in a Model of Trade, Migration and Politics

Abstract

This paper uses a probabilistic voting model to investigate voting for a free-trade agreement between a labor-abundant country and a capital-abundant country. Migration from the labor-abundant country to the capital-abundant country increases the probability of a free-trade agreement, with lower migration costs leading to more migration and a higher free-trade probability. On the other hand, if a lower probability of free trade is caused by an increased voter bias against free-trade candidates, then there is less migration. A dynamic extension of the model is also investigated.

Keywords

free trade / migration / Heckscher-Ohlin / labor-abundant / capital- abundant

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2018 Higher Education Press