Urban unemployment, international labor mobility and welfare

This paper extends the Harris-Todaro model to include the possibility of international labor movement and analyze the effectiveness of some development policies, for example, wage subsidies and an import tariff. This possibility will change the conventional results that these policies raise the welfare from the laissez-faire level. We show that these policies lower the welfare in terms of internal (domestic) labor, but they improve the welfare if foreign labor is discriminated by wage tax, exploitation or other practices.