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The Political Economy of Immigrationa and Income Redistribution

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  • Jim Dolmas

    (Federal Reserve Bank of Dallas)

  • Gregory W. Huffman

    ()
    (Department of Economics, Vanderbilt University)

Abstract

In this paper, we study several general equilibrium models in which the agents in an economy must decide on the appropriate level of immigration into the country. Immigration does not enter directly into the native agents' utility functions, and natives have identical preferences over consumption goods. However, natives may be endowed with different amounts of capital, which alone gives rise to alternative levels of desired immigration. We show that the natives' preferences over desired levels of immigration are influenced by the prospect that new immigrants will be voting in the future, which may lead to higher taxation to finance government spending from which they will benefit. We also show that changes in the degree of international capital mobility, the distribution of initial capital among natives, the wealth or poverty of the immigrant pool, and the future voting rights and entitlements of immigrants can all have a dramatic effect on the equilibrium immigration and taxation policies. Both the model and the empirical evidence support the notion that inequality can lead to reduced immigration. The results suggest that opposition to immigration can be mitigated by enhanced capital mobility, as well as from removing some of the benefits that immigrants ultimately receive, either in the form of government transfers, or the franchise to vote.

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File URL: http://www.accessecon.com/pubs/VUECON/vu03-w12.pdf
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Bibliographic Info

Paper provided by Vanderbilt University Department of Economics in its series Vanderbilt University Department of Economics Working Papers with number 0312.

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Date of creation: May 2003
Date of revision:
Handle: RePEc:van:wpaper:0312

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Web page: http://www.vanderbilt.edu/econ/wparchive/index.html

Related research

Keywords: Capital mobility; immigration; political economy; taxation; voting;

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References

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  1. Jim Dolmas & Gregory W. Huffman, 1998. "On the political economy of immigration and income redistribution," Working Papers 9804, Federal Reserve Bank of Dallas.
  2. Borjas, George J & Freeman, Richard B & Katz, Lawrence, 1996. "Searching for the Effect of Immigration on the Labor Market," American Economic Review, American Economic Association, vol. 86(2), pages 246-51, May.
  3. Klaus Deininger & Lyn Squire, 1996. "A New Data Set Measuring Income Inequality," CEMA Working Papers 512, China Economics and Management Academy, Central University of Finance and Economics.
  4. George J. Borjas & Richard B. Freeman & Lawrence F. Katz, 1991. "On the Labor Market Effects of Immigration and Trade," NBER Working Papers 3761, National Bureau of Economic Research, Inc.
  5. David Card, 1989. "The Impact of the Mariel Boatlift on the Miami Labor Market," NBER Working Papers 3069, National Bureau of Economic Research, Inc.
  6. George J. Borjas, 1995. "The Economic Benefits from Immigration," Journal of Economic Perspectives, American Economic Association, vol. 9(2), pages 3-22, Spring.
  7. Razin, A. & Sadka, E. & Swagel, P., 1998. "Tax Burden and Migration: a Political Economy Theory and Evidence," Papers 15-98, Tel Aviv.
  8. Enrique G. Mendoza & Linda L. Tesar, 1995. "Supply-Side Economics in a Global Economy," NBER Working Papers 5086, National Bureau of Economic Research, Inc.
  9. Alex Cukierman & Zvi Hercowitz & David Pines, 1994. "The Political Economy of Immigration," Public Economics 9405002, EconWPA.
  10. David K. Backus & Patrick J. Kehoe & Finn E. Kydland, 1992. "Dynamics of the trade balance and the terms of trade: the S-curve," Working Paper 9211, Federal Reserve Bank of Cleveland.
  11. Baxter, Marianne & Crucini, Mario J, 1993. "Explaining Saving-Investment Correlations," American Economic Review, American Economic Association, vol. 83(3), pages 416-36, June.
  12. Storesletten, Kjetil, 1998. "Sustaining Fiscal Policy Through Immigration," Seminar Papers 664, Stockholm University, Institute for International Economic Studies.
  13. Jim Dolmas & Gregory W. Huffman, 1997. "The political economy of endogenous taxation and redistribution," Working Papers 9704, Federal Reserve Bank of Dallas.
  14. Topel, Robert H, 1994. "Regional Labor Markets and the Determinants of Wage Inequality," American Economic Review, American Economic Association, vol. 84(2), pages 17-22, May.
  15. Jim Dolmas & Gregory W. Huffman, 1997. "On the political economy of immigration," Working Papers 9706, Federal Reserve Bank of Dallas.
  16. Hongyi Li & Lyn Squire & Tao Zhang & Heng-fu Zou, 1999. "A Data Set on Income Distribution," CEMA Working Papers 575, China Economics and Management Academy, Central University of Finance and Economics.
  17. Persson, T. & Tabellini, G., 1993. "Is Inequality Harmful for Growth," Papers 537, Stockholm - International Economic Studies.
  18. George J. Borjas, 1994. "The Economics of Immigration," Journal of Economic Literature, American Economic Association, vol. 32(4), pages 1667-1717, December.
  19. David K. Backus & Patrick J. Kehoe & Finn E. Kydland, 1987. "International real business cycles," Working Papers 426, Federal Reserve Bank of Minneapolis.
  20. James F. Dolmas & Gregory W. Huffman, 2000. "The dynamics of immigration policy with wealth-heterogeneous immigrants," Working Papers 0006, Federal Reserve Bank of Dallas.
  21. Mendoza, Enrique G, 1991. "Real Business Cycles in a Small Open Economy," American Economic Review, American Economic Association, vol. 81(4), pages 797-818, September.
  22. Michael Ben-Gad, 2000. "An Analysis of Immigration in a Dynamic Macroeconomic Model," Econometric Society World Congress 2000 Contributed Papers 0195, Econometric Society.
  23. Benhabib, Jess, 1996. "On the political economy of immigration," European Economic Review, Elsevier, vol. 40(9), pages 1737-1743, December.
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Citations

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Cited by:
  1. Assaf Razin & Efraim Sadka & Benjarong Suwankiri, 2010. "Migration and the Welfare State: Dynamic Political-Economy Theory," CESifo Working Paper Series 2991, CESifo Group Munich.
  2. Tito Boeri, 2009. "Immigration to the land of redistribution," LSE Research Online Documents on Economics 53364, London School of Economics and Political Science, LSE Library.
  3. Ortega, Francesc, 2005. "Immigration quotas and skill upgrading," Journal of Public Economics, Elsevier, vol. 89(9-10), pages 1841-1863, September.
  4. Robert Duval-Hernandez & Ferran Martinez i Coma, 2012. "Immigrants' rights and benefits. A public opinion analysis for Spain," University of Cyprus Working Papers in Economics 15-2012, University of Cyprus Department of Economics.
  5. Karin Mayr, 2007. "Immigration and income redistribution: A political economy analysis," Public Choice, Springer, vol. 131(1), pages 101-116, April.

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