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What is the Optimal Immigration Policy? Migration, Jobs and Welfare

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  • Rebelo, Sérgio
  • Guerreiro, Joao
  • Teles, Pedro

Abstract

We study the immigration policy that maximizes the welfare of the native population in an economy where the government designs an optimal redistributive welfare system and supplies public goods. We show that when immigrants can be excluded from the welfare system, free immigration is optimal. It is also optimal to use the tax system to encourage the immigration of high-skill workers and discourage that of low-skill workers. When immigrants and natives must be treated alike, it is optimal to ban low-skill immigration and have free immigration for high-skill workers. However, high-skill workers may choose not to immigrate when there are heavy taxes levied on all high-skill workers, natives and immi- grants alike. We use a calibrated version of the model to study how the optimal immigration policy responds to changes in the skill premia in the U.S. and abroad.

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  • Rebelo, Sérgio & Guerreiro, Joao & Teles, Pedro, 2019. "What is the Optimal Immigration Policy? Migration, Jobs and Welfare," CEPR Discussion Papers 13909, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:13909
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    Cited by:

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    2. Jinno, Masatoshi & Yasuoka, Masaya, 2022. "The effects of admittingi Immigrants: a look at Japan’s school and pension systems," MPRA Paper 115182, University Library of Munich, Germany.
    3. Busch, Christopher & Krueger, Dirk & Ludwig, Alexander & Popova, Irina & Iftikhar, Zainab, 2020. "Should Germany have built a new wall? Macroeconomic lessons from the 2015-18 refugee wave," Journal of Monetary Economics, Elsevier, vol. 113(C), pages 28-55.
    4. Juanmarti Mestres, Arnau & López Casasnovas, Guillem & Vall Castelló, Judit, 2021. "The deadly effects of losing health insurance," European Economic Review, Elsevier, vol. 131(C).
    5. Alessandria, George & Bai, Yan & Deng, Minjie, 2020. "Migration and sovereign default risk," Journal of Monetary Economics, Elsevier, vol. 113(C), pages 1-22.
    6. Michael Clemens, 2021. "The Fiscal Effect of Immigration: Reducing Bias in Influential Estimates," CESifo Working Paper Series 9464, CESifo.
    7. Orhan Erem Atesagaoglu & Hakki Yazici, 2021. "Optimal Taxation of Capital in the Presence of Declining Labor Share," Bristol Economics Discussion Papers 21/739, School of Economics, University of Bristol, UK.

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    More about this item

    Keywords

    Immigration; Optimal taxation; Welfare state; Redistribution;
    All these keywords.

    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration

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