Imperfect intersectoral labour mobility and welfare in international trade

This paper sets out a general 'costs-of-employment' model by which to analy se the impediments to relocation faced by workers who must choose between i ndustrial sectors in response to a terms of trade shock. Different types of employment cost generate different types of relocation cost. The theoretic al literature on intersectoral labour relocation in international trade mod els is reviewed in the light of this model with various special cases analy sed in detail. Special attention is given to the comparison between equilib rium and socially efficient patterns of migration. Different specifications of relocation costs lead to very different welfare effects and policy pres criptions.