ABSTRACT

After the traumatic experience of World War Two, nations concurred in their aim for peace and economic prosperity. They established an ever denser network of informal and formal cooperation and thereby allowed economic boundaries to be detached from political frontiers. Markets have been merging with increasing speed and international specialization and globalization have been taking place generating increasing economic welfare: present times have become the age of economic integration, of which the realization of the European Common Market programme represents just the most recent notable step. Economic integration may take place through three different

instruments: free trade the (legally) free flow of capital (international investment) and the free migration of people. While the well known obstacles to trade usually leave plenty of room for national borders to matter in economic terms, a liberalization of the remaining two instruments of international integration, capital flows and migration, reduces the economic importance of borders significantly and strengthens locational competition between integrating regions. With economic integration proceeding, the focus of institutional economic integration has shifted from pure liberalization of trade to the liberalization of trade and factor flows. This chapter presents an investigation of part of the latter, namely the (allocative and distributive) effects of free migration on regional growth and income convergence in the context of economic integration.