INTRODUCTION INTERNATIONAL LABOR MOBILITY Further comparisons are also made using alternative assumptions about labor mobility INTERNATIONAL BORROWING AND LENDING International capital movements can bring major gains both to the lending or investing countries and to the borrowing countries, through intertemporal trade and through portfolio diversification for the lenders/investors. But international lending and borrowing is not always well-behaved-financial crises are recurrent. This chapter examines both the gains from well-behaved lending and borrowing and what we know about international financial crises. We begin with the economic analysis of international capital flows that focuses on the stock of wealth of two countries and how that wealth can be lent or invested in the two countries. With no international lending, the country that has much wealth relative to its domestic investment opportunities will have a lower rate of return or interest rate. Freeing international capital flows permits the low-rate country to lend to the high-rate country. As the world shifts to an equilibrium with free capital movements, both countries gain. As usual, however, within each country there are groups that gain and groups that lose from the international lending. We can also use this analysis to show that either nation could gain by imposing a small tax on the international capital flows, because it could shift the pre-tax foreign interest rate in its favor. Either country could seek to impose a nationally optimal tax, but this works well only if the other country does not impose a comparable tax. International lending and borrowing between industrialized countries generally is well-behaved, but this is not the case for lending by industrialized countries to developing countries. The chapter provides a tour of the history of this latter kind of lending from the 1970s to the early 2000s. Following defaults in the 1930s, lending to developing countries...