We consider international labor (entrepreneur) mobility in a two-country overlapping-generations model. Interactions of decreasing and increasing returns in production yield multiple equilibria that are stable under adaptive learning. Governments have an unilateral incentive to reduce income...

We analyze the welfare impact of entrepreneur mobility in a two-country model. Increasing returns in production yield multiple equilibria that are stable under adaptive learning. Governments compete for the mobile resource by setting income taxes. We show that large welfare gains can arise from...