Migration and the environment : policy reform in a polluted open economy

Previous literature on labour migration has paid little attention to the influence of environmental attributes. This paper attempts to remedy this void by developing a simple, two-region general equilibrium model with amenities playing a key role in affecting migration flows. Specifically, we argue that in the presence of an environmental externality, interregional labour migration depends not only on wages but also on amenities. People may leave a region offering higher wages, if the resulting utility loss from worsened amenities exceeds the gain in wages. Policies should be adopted by regions or nations to regulate the environment to provide for the quality of living. To attain this goal, regional or international policy cooperation on tradable pollution permits can be superior to pollution permits supplied independently by each region or nation while non-tradable between them.