Abstract

In this paper we consider an overlapping generation model in which people, born in two different countries, decide where to spend their working period of life, and where to retire after it. The two countries differ in technology and quality of life. The "northern" country, N, is more productive, while in the "southern" country, S, people enjoy a better quality of life. Locational preferences are influenced not only by "objective" criteria –like climate, pollution, congestion–, but also by "cultural" factors. Thus we assume that people prefer to live in their country of origin. footnote It will be shown that, under plausible assumptions, locational decisions cause migration from S to N, but the importance of this phenomenon depends on how locational preferences are made endogenous. In Section 2 we describe the production side of our model, and in Section 3 its consumption side. We then examine the influence of locational preferences that are taken as exogenous, in Section 4, and made endogenous, at least for their subjective component, in Section 5.