ABSTRACT
Daily news reports regularly warn of the challenges posed by immigration or debate the desirability of allowing foreign investment. Consequently, we must admit that the assumption of completely immobile factors of production conflicts with reality. At least some labor and capital movement occurs between countries, as we document below. Labor migrates, legally or otherwise, from low-to higher-wage countries. Capital flows internationally in response to differences in rates of return. Of course, labor mobility is limited by immigration laws, transportation costs, lack of information about job opportunities, and language differences. International investors are deterred by different legal and regulatory environments, discriminatory taxes, potential expropriation, incomplete information, and various other risks. Nevertheless, concerns over globalization rest as much on the rapid increases in labor and capital mobility internationally as on the increase in international trade.
