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A political economy model of immigration quotas

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    Abstract

    The paper examines a model in which the number of immigrants allowed into a country is the outcome of a costly political lobbying process between a firm and a union. The union and the firm bargain over the wage of natives after the number of immigrants that will be permitted is known. I consider two contest success functions: one in which the lobbyist with the higher effort is not necessarily the winner and another in which the lobbyist with the higher effort wins with certainty (i.e., the all-pay auction). Comparative statics results are derived to show how the reservation wage of immigrants, the size of the union, the sensitivity of the legislature to lobbying, the reservation of wage of natives, the price of the firm's product and the firm's bargaining power affect immigration quotas and the post-immigration wage of natives. I also discuss some limitations of my results.

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    File URL: http://www.sfu.ca/econ-research/RePEc/sfu/sfudps/dp00-19.pdf
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    Bibliographic Info

    Paper provided by Department of Economics, Simon Fraser University in its series Discussion Papers with number dp00-19.

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    Length: 33 pages
    Date of creation: 2000
    Date of revision: 19 Sep 2000
    Handle: RePEc:sfu:sfudps:dp00-19

    Contact details of provider:
    Postal: Department of Economics, Simon Fraser University, 8888 University Drive, Burnaby, BC, V5A 1S6, Canada
    Phone: (778)782-3508
    Fax: (778)782-5944
    Web page: http://www.sfu.ca/economics.html
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    Postal: Working Paper Coordinator, Department of Economics, Simon Fraser University, 8888 University Drive, Burnaby, BC, V5A 1S6, Canada
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    Web: http://www.sfu.ca/economics/research/publications.html

    Related research

    Keywords: all-pay auction; immigration; lobbying; mixed strategy; Nash bargaining;

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    References

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    1. Amegashie, J Atsu, 1999. " The Design of Rent-Seeking Competitions: Committees, Preliminary and Final Contests," Public Choice, Springer, vol. 99(1-2), pages 63-76, April.
    2. 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.
    3. Schoonbeek, L. & Kooreman, P., 1997. "The specification of the probability functions in Tullock's rentseeking contest," Open Access publications from Tilburg University urn:nbn:nl:ui:12-377560, Tilburg University.
    4. Gary S. Becker, 1991. "A Note on Restaurant Pricing and Other Examples of Social Influences on Price," University of Chicago - George G. Stigler Center for Study of Economy and State 67, Chicago - Center for Study of Economy and State.
    5. Arye L. Hillman & John G. Riley, 1987. "Politically Contestable Rents and Transfers," UCLA Economics Working Papers 452, UCLA Department of Economics.
    6. George J. Borjas, 1994. "The Economics of Immigration," Journal of Economic Literature, American Economic Association, vol. 32(4), pages 1667-1717, December.
    7. Ellingsen, T., 1990. "Strategic Buyers and the Social Cost of Monopoly," Papers 05-90, Norwegian School of Economics and Business Administration-.
    8. Baye, M.R. & Kovenock, D. & De Varies, C.G., 1990. "The All-Pay Auction With Complete Information," Papers 9051, Tilburg - Center for Economic Research.
    9. Amegashie, J Atsu, 1999. " The Number of Rent-Seekers and Aggregate Rent-Seeking Expenditures: An Unpleasant Result," Public Choice, Springer, vol. 99(1-2), pages 57-62, April.
    10. Baye, M.R. & Kovenock, D. & De Vries, C.G., 1992. "Rigging the Lobbying Process: An Application of the All- Pay Auction," Papers 9-92-2, Pennsylvania State - Department of Economics.
    11. Amegashie, J Atsu, 2000. " How Unpleasant a Result?: A Reply to Derek J. Clark," Public Choice, Springer, vol. 102(3-4), pages 369-72, March.
    12. Grossman, Gene M & Helpman, Elhanan, 1994. "Protection for Sale," American Economic Review, American Economic Association, vol. 84(4), pages 833-50, September.
    13. Glazer, Amihai & Konrad, Kai A., 1999. "Taxation of rent-seeking activities," Journal of Public Economics, Elsevier, vol. 72(1), pages 61-72, April.
    14. Amegashie, J. Atsu, 2001. "An all-pay auction with a pure-strategy equilibrium," Economics Letters, Elsevier, vol. 70(1), pages 79-82, January.
    15. Amegashie, J Atsu, 2000. " Some Results on Rent-Seeking Contests with Shortlisting," Public Choice, Springer, vol. 105(3-4), pages 245-53, December.
    16. Che, Yeon-Koo & Gale, Ian L, 1998. "Caps on Political Lobbying," American Economic Review, American Economic Association, vol. 88(3), pages 643-51, June.
    17. George J. Borjas, 1994. "The Economic Benefits from Immigration," NBER Working Papers 4955, National Bureau of Economic Research, Inc.
    18. Benhabib, Jess, 1996. "On the political economy of immigration," European Economic Review, Elsevier, vol. 40(9), pages 1737-1743, December.
    19. Nitzan, Shmuel, 1994. "Modelling rent-seeking contests," European Journal of Political Economy, Elsevier, vol. 10(1), pages 41-60, May.
    20. Che, Yeon-Koo & Gale, Ian, 1997. " Rent Dissipation When Rent Seekers Are Budget Constrained," Public Choice, Springer, vol. 92(1-2), pages 109-26, July.
    21. Clark, D.J. & Riis, C., 1996. "On the Win Probability in Rent-Seeking Gemes," Memorandum 05/1996, Oslo University, Department of Economics.
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