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An incentive mechanism to break the low-skill immigration deadlock

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  • DE LA CROIX, David

    ()
    (Université catholique de Louvain (UCL). Center for Operations Research and Econometrics (CORE))

  • DOCQUIER, Frédéric

    ()
    (Université catholique de Louvain (UCL). Institut de recherches économiques ( IRES))

Abstract

Although movements of capital, goods and services are growing in importance, workers movements are impeded by restrictive policies in rich countries. Such regulations carry substantial economic costs for developing countries, and prevent global inequality from declining. Even if rich countries are averse to global inequality, a single country lacks incentives to welcome additional migrants as it would bear the costs alone while the benefits accrue to all rich states. Aversion to global inequality confers a public good nature to the South-North migration of low-skill workers. We propose an alternative allocation of labor maximizing global welfare subject to the constraints that the rich countries are at least as well off as in the current “nationalist” (or “Nashionalist”) situation. This “no regret” allocation can be decentralized by a tax-subsidy scheme which makes people internalize the fact that as soon as a rich country welcomes an additional migrant, global inequalities are reduced, and everybody in the rich world is better off too. Our model is calibrated using statistics on immigration, working-age population and output. We simulate the proposed scheme on different sets of rich countries.

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Bibliographic Info

Paper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers with number 2009053.

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Date of creation: 01 Sep 2009
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Handle: RePEc:cor:louvco:2009053

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Keywords: public good; inequality aversion; immigration policy;

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References

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  1. Facchini, Giovanni & Mayda, Anna Maria, 2008. "From Individual Attitudes towards Migrants to Migration Policy Outcomes: Theory and Evidence," IZA Discussion Papers 3512, Institute for the Study of Labor (IZA).
  2. Charness, Gary B & Rabin, Matthew, 2001. "Understanding Social Preferences With Simple Tests," University of California at Santa Barbara, Economics Working Paper Series qt0dc3k4m5, Department of Economics, UC Santa Barbara.
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  10. Hans Gersbach & Ralph Winkler, 2007. "On the Design of Global Refunding and Climate Change," CER-ETH Economics working paper series 07/69, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich, revised Jul 2007.
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Cited by:
  1. Giordani, Paolo E. & Ruta, Michele, 2013. "Coordination failures in immigration policy," Journal of International Economics, Elsevier, vol. 89(1), pages 55-67.
  2. Frédéric DOCQUIER & Joël MACHADO & Khalid SEKKAT, 2012. "Efficiency gains from liberalizing labor mobility," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2012023, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
  3. Moraga, Jesús Fernández-Huertas & Rapoport, Hillel, 2011. "Tradable Immigration Quotas," CEPREMAP Working Papers (Docweb) 1114, CEPREMAP.

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