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Subsidies for Wages and Infrastructure: How to Restrain Undesired Immigration

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Author Info
Robert Fenge ()
Volker Meier ()

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Abstract

This paper investigates regional or international transfers as a means to prevent immigration into unemployment. We analyze a two-country model with free migration in which the rich country is characterized by minimum wage unemployment. Matching grants for investment in infrastructure are superior to wage subsidies because the former instrument leads to a stronger productivity growth in the poor country, reducing both migration flows and unemployment in the rich country. This result is shown to hold for a sufficiently low level of the regional policy budget. It explains the exclusive use of investment subsidies in the EU.

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Publisher Info
Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number CESifo Working Paper No. 1741.

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Date of creation: 2006
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Handle: RePEc:ces:ceswps:_1741

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Related research
Keywords: regional policy; public infrastructure; wage subsidies; unemployment; migration;

Find related papers by JEL classification:
D62 - Microeconomics - - Welfare Economics - - - Externalities
H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures
H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
J61 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Geographic Labor Mobility; Immigrant Workers
R50 - Urban, Rural, and Regional Economics - - Regional Government Analysis - - - General

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Myers, Gordon M. & Papageorgiou, Yorgos Y., 2000. "Immigration control and the welfare state," Journal of Public Economics, Elsevier, vol. 75(2), pages 183-207, February. [Downloadable!] (restricted)
    Other versions:
  2. Panos Hatzipanayotou & Michael S. Michael, 2005. "Migration, Tied Foreign Aid and the Welfare State," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
  3. Wellisch, Dietmar & Wildasin, David E., 1996. "Decentralized income redistribution and immigration," European Economic Review, Elsevier, vol. 40(1), pages 187-217, January. [Downloadable!] (restricted)
  4. Martin, Philippe, 1999. "Public policies, regional inequalities and growth," Journal of Public Economics, Elsevier, vol. 73(1), pages 85-105, July. [Downloadable!] (restricted)
    Other versions:
  5. Boldrin, Michele & Canova, Fabio, 2003. "Regional Policies and EU Enlargement," CEPR Discussion Papers 3744, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  6. Fuest, Clemens & Huber, Bernd, 2006. "Can regional policy in a federation improve economic efficiency?," Journal of Public Economics, Elsevier, vol. 90(3), pages 499-511, February. [Downloadable!] (restricted)
  7. Robert Fenge & Matthias Wrede, 2004. "EU Regional Policy: Vertical Fiscal Externalities And Matching Grants," Royal Economic Society Annual Conference 2004 63, Royal Economic Society. [Downloadable!]
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  8. Figuieres, Charles & Hindriks, Jean, 2002. "Matching grants and Ricardian equivalence," Journal of Urban Economics, Elsevier, vol. 52(1), pages 177-191, July. [Downloadable!] (restricted)
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  9. Brecher, Richard A. & Choudhri, Ehsan U., 1987. "International migration versus foreign investment in the presence of unemployment," Journal of International Economics, Elsevier, vol. 23(3-4), pages 329-342, November. [Downloadable!] (restricted)
  10. Philippe Martin, 1998. "Can Regional Policies Affect Growth and Geography in Europe?," The World Economy, Blackwell Publishing, vol. 21(6), pages 757-774, 08. [Downloadable!] (restricted)
  11. Michele Boldrin & Fabio Canova, 2001. "Inequality and convergence in Europe's regions: reconsidering European regional policies," Economic Policy, CEPR, CES, MSH, vol. 16(32), pages 205-253, 04. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Karin Mayr & Steffen Minter & Tim Krieger, 2008. "Policies on illegal immigration in a federation," Vienna Economics Papers 0909, University of Vienna, Department of Economics. [Downloadable!]
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