Larry A. Sjaastad

The Costs and Returns of Human Migration

LARRY A. SJAASTAD University of Minnesota M IGRATION research has dealt mainly with the forces which affect migration and how strongly they have affected it, but little has been done to determine the influence of migration as an equilibrating mechanism in a changing economy. The movements of migrants clearly are in the appropriate direction, but we do not know whether the numbers are sufficient o be efficient in correcting income disparities as they emerge.2 There is a strong presumption that they are not. The central purpose of this paper is to develop the concepts and tools with which to attack the latter problem. I propose to identify some of the important costs and returns to migrationboth public and private-and, to a limited extent, devise methods for estimating them. This treatment places migra-

The price of gold and the exchange rate

Abstract This paper examines the theoretical relationship between the major exchange rates and the prices of internationally-traded commodities. In the empirical section, the case of gold is analyzed using forecast error data. Among other things, it is found that, since the dissolution of the Bretton Woods International monetary system, floating exchange rates among the major currencies have been a major source of price instability in the world gold market and, as the world gold market is dominated by the European currency bloc, appreciations or depreciations of European currencies have strong effects on the price of gold in other currencies.

The Social Cost of Public Finance

This paper examines the implications for fiscal policy of systematic differences between (social) rates of return on private investment and savings. We show that the social discount rate lies between these divergent rates of return, that the controversy between this result and Marglins stems entirely from different treatments of depreciation, and that reinvestment of net project output has negligible quantitative effects on the social discount rate. Then, within a macroeconomic framework, we derive the stringent conditions for a unique discount rate and demonstrate that, as public-sector consumption must also be charged a shadow price, the social value of a global change in output induced by countercyclical fiscal policy must exceed its (nonzero) social cost. Finally, we examine the Little-Mirrlees concept of the social cost of labor and find it unacceptable.

Commercial Policy, ‘True’ Tariffs and Relative Prices

One of the manifestations of the ‘new’ protectionism is the sharply increased concern over ‘dumping’ which comes precisely at a time when several countries, particularly the developing countries, have implemented export-promotion policies in the form of direct or indirect export subsidies. One suspects that many of these subsidies do no more than compensate for the damaging relative-price effects of pre-existing protectionist policies; to the extent that, if this is true, the dumping that is taking place is more apparent than real in that there exists an alternative foreign trade regime that would: (i) eliminate direct as well as indirect export subsidies; and (ii) leave the existing relative price structure roughly unaffected. This paper is addressed to that (and other) issues in the general area of the relative price effects of commercial policy.

Debts and Deficits in Australia

The question of the current account deficit and the external debt has become the hottest issue in Australia since the «Bottom of the Harbor» scandal of 1982. The net external debt, currently calculated at a bit more than 30% of GDP (with interest payments at about 3% of GDP), is growing rapidly due to a current account deficit that, in the second half of 1989, was approximately 5% of GDP. The spirited and, at times, hysterical controversy over the debt and deficit issue has been lead by Professor John Pitchford, who supports (or at least gives comfort to) the Labor government’s policy of benign neglect of the deficit, arguing quite sensibly that foreign borrowing is not inherently bad in the absence of externalities that cause the private cost of external borrowing to fall short of the social cost (1). The financial press and, more recently, the business community, have strongly condemned the government’s attitude.