ABSTRACT
Let us take the argument one step further. If we assume perfect competition, full information, costless adjustment and no externalities or economies of scale, factors’ rewards (prices) will equal tlieir marginal social products (see Chapter 7). Under these circumstances, differing factor prices across countries will signal the need for factor mobility, and, equally important, any international migration that equalised factor prices would maximise world output. In general, factor migration will tend to equalise rewards: as, say, labour leaves low-wage areas for high-wage areas the supply of labour falls in the former, raising wages, and rises in the latter, reducing them. Thus, just as international trade, which shifts goods from areas of low prices to areas of high prices, is beneficial, so too is international migration, which shifts factors from areas of low rewards to areas of high rewards.
