Economic integration, labour migration and unemployment

The aim of this article is to study the impact of labour migration on unemployment rates differentials, on the aggregate level of unemployment and welfare, when wages are negotiated at the firm level. We consider a two-region model. The good market is supposed to be perfectly integrated and competitive. The two regions differ about labour force level labour productivity, workers' bargaining power and replacement ratio, it is shown that labour migration do not exclude persistant unemployment rates differentials. Moreover, labour mobility can increase or decrease the general level of unemployment at the equilibrium and increase the impact of a permanent technological shock on it Futhermore, if the impact of labour mobility on social welfare depends on parameters, it always induces an increase in the welfare of the most disadvantaged people.