Immigration, Conflict, and Redistribution
We study how the possibility of a conflict between natives and immigrants shapes income redistribution in democracies. Conflict erupts when immigrants are given less than what they could obtain by resorting to confrontation. That in turn can make natives vote for lower tax rates and lower public spending. We show that income redistribution, both vertical (from the rich to the poor) and horizontal (from natives to migrants), decreases with the level of immigration. This is because the threat of conflict intensifies as the migrant population becomes bigger. Inequality softens the effect of immigration on tax rates but reduces horizontal redistribution. Despite the threat of conflict, the welfare of the native population unambiguously increases with the stock of migrants.
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Volume (Year): 118 (2016)
Issue (Month): 3 (July)
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