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Managing Migration Through Conflicting Policies: An Option-Theory Perspective

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  • Michele Moretto
  • Sergio Vergalli

Abstract

Recent European legislation on immigration has revealed a particular paradox on migration policies. On the one hand, the trend of recent legislation points to the increasing closure of frontiers (OECD 1999, 2001,2004), trying to limit the immigrants’ stock. On the other hand, there is an increase in regularization, i.e., European policies are becoming less tight. Our aim here is to develop a theoretical model that tries to explain if it is better for the government to tighten or relax limits for immigrants in order to control migration inflows better. To this end, we use a real option approach to migration choice that assumes that the decision to migrate can be described as an irreversible investment decision. In our model the government has in mind a specific upper bound on immigrants, and the policies adopted (admission requirements or regularizations) are signals for each potential migrant that reveal information about this limit. Our results show that promoting uncertainty over this migration upper bound may improve the government’s control on migration inflows (quotas). This could explain that the paradox of counterbalancing policies is not an odd evidence. In particular, we show that if the government controls the information related to the immigration stock it could delay the mass entry of immigrants, maintaining the required stock in the long run and controlling the flows in the short-run.

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Bibliographic Info

Article provided by Scottish Economic Society in its journal Scottish Journal of Political Economy.

Volume (Year): 57 (2010)
Issue (Month): s1 (07)
Pages: 318-342

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Handle: RePEc:bla:scotjp:v:57:y:2010:i:s1:p:318-342

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References

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  1. Ira N. Gang & Thomas Bauer & Gil S. Epstein, 2002. "Herd Effects or Migration Networks? The Location Choice of Mexican Immigrants in the U.S," Departmental Working Papers 200216, Rutgers University, Department of Economics.
  2. Sergio Vergalli, 2006. "The Role of Community in Migration Dynamics," Working Papers 2006.4, Fondazione Eni Enrico Mattei.
  3. Michele Moretto & Sergio Vergalli, 2007. "Migration Dynamics," "Marco Fanno" Working Papers 0053, Dipartimento di Scienze Economiche "Marco Fanno".
  4. Cesare Dosi & Michele Moretto, 2001. "Is Ecolabelling a Reliable Environmental Policy Measure?," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 18(1), pages 113-127, January.
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  12. Bartolini, Leonardo, 1995. "Foreign investment quotas and rent extraction under uncertainty," Journal of International Economics, Elsevier, vol. 38(1-2), pages 25-49, February.
  13. Sergio Vergalli, 2006. "Entry and Exit Strategies in Migration Dynamics," Working Papers 2006.123, Fondazione Eni Enrico Mattei.
  14. Avinash Dixit, 1992. "Irreversible Investment with Uncertainty and Scale Economies," STICERD - Theoretical Economics Paper Series /1992/240, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
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Cited by:
  1. Michael Funke & Yu-Fu Chen, 2010. "Booms, recessions and financial turmoil: A fresh look at investment decisions under cyclical uncertainty," Quantitative Macroeconomics Working Papers 21007, Hamburg University, Department of Economics.
  2. Sergio Vergalli, 2011. "Entry and Exit Strategies in Migration Dynamics," Journal of Labor Research, Springer, vol. 32(4), pages 362-389, December.

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