ABSTRACT
Unhappy surprises accompanied market liberalizations in Latin America. In spite of sharp increases in Foreign direct investment (FDI), the regional level of fixed investment was lower than it had been prior to capital market opening. An asymmetric ‘globalization,’ along with the domestic liberalization of regional labor markets, undercut labor’s power relative to capital. There were many countries, many import competing goods, multiple productive factors, tacit, proprietary, increasing returns technology, and asymmetric international factor mobility. Under the plausible assumption that trade in goods is less costly than labor mobility, the case for trade liberalization in capital-abundant countries would be even stronger. The very large, global and individual net gains, often by multiples, that were possible from more liberalized labor flows emerged as all the more significant when contrasted with the very minimal, fractional gains that could be squeezed from the further liberalization of goods and capital markets.
