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Is There Too Little Immigration?

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Author Info
Subhayu Bandyopadhyay () (Federal Reserve Bank of St. Louis and IZA)
Howard J. Wall () (Federal Reserve Bank of St. Louis)

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Abstract

This paper presents a model of legal migration from one source country to two host countries, both of which can control their levels of immigration. Because of complementarities between capital and labor, the return on capital is positively related to the level of immigration. Consequently, when capital is immobile, host nations’ optimal levels of immigration are positively related to their capital endowments. Further, when capital is mobile between the two host nations, the common return on capital is a function of the levels of immigration in both countries, meaning that immigration is a public good. As a result, when immigration imposes costs on host countries, the Nash equilibrium results in free riding and less immigration than would occur in the cooperative equilibrium. These results are qualitatively unaltered when capital mobility extends to the source nation.

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Publisher Info
Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 2825.

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Length: 21 pages
Date of creation: Jun 2007
Date of revision:
Handle: RePEc:iza:izadps:dp2825

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Related research
Keywords: immigration free riding externalities capital mobility

Other versions of this item:

Find related papers by JEL classification:
F22 - International Economics - - International Factor Movements and International Business - - - International Migration
J61 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Geographic Labor Mobility; Immigrant Workers

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References listed on IDEAS
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  1. Gianmarco I.P. Ottaviano & Giovanni Peri, 2005. "Rethinking the Gains from Immigration: Theory and Evidence from the U.S," NBER Working Papers 11672, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  2. George J. Borjas, 2001. "Does Immigration Grease the Wheels of the Labor Market?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 32(2001-1), pages 69-134. [Downloadable!]
  3. Panagariya, Arvind & Schiff, Maurice, 1994. "Can revenue maximizing export taxes yield higher welfare than welfare maximizing export taxes?," Economics Letters, Elsevier, vol. 45(1), pages 79-84, May. [Downloadable!] (restricted)
  4. Scott M. Fuess, 2003. "Immigration Policy and Highly Skilled Workers: The Case of Japan," Contemporary Economic Policy, Oxford University Press, vol. 21(2), pages 243-257, April.
  5. Christian Dustmann & Arthur Van Soest, 2002. "Language and the earnings of immigrants," Industrial and Labor Relations Review, ILR Review, ILR School, Cornell University, vol. 55(3), pages 473-492, April.
    Other versions:
  6. Bandyopadhyay, Subhayu, 1996. "Growth, welfare and optimal trade taxes: a fallacy of composition," Journal of Development Economics, Elsevier, vol. 50(2), pages 369-380, August. [Downloadable!] (restricted)
  7. Klaus Zimmermann, 2005. "European Labour Mobility: Challenges and Potentials," De Economist, Springer, vol. 153(4), pages 425-450, December. [Downloadable!] (restricted)
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  8. Bond, Eric W. & Chen, Tain-Jy, 1987. "The welfare effects of illegal immigration," Journal of International Economics, Elsevier, vol. 23(3-4), pages 315-328, November. [Downloadable!] (restricted)
  9. Richard B. Freeman, 2004. "Trade Wars: The Exaggerated Impact of Trade in Economic Debate," The World Economy, Blackwell Publishing, vol. 27(1), pages 1-23, 01. [Downloadable!] (restricted)
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  10. Xin Meng & Robert G. Gregory, 2005. "Intermarriage and the Economic Assimilation of Immigrants," Journal of Labor Economics, University of Chicago Press, vol. 23(1), pages 135-176, January. [Downloadable!]
  11. Ethier, Wilfred J, 1986. "Illegal Immigration: The Host-Country Problem," American Economic Review, American Economic Association, vol. 76(1), pages 56-71, March. [Downloadable!] (restricted)
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