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

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  • Guerreiro, Joao
  • Rebelo, Sérgio
  • 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.

Suggested Citation

  • Guerreiro, Joao & Rebelo, Sérgio & 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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    References listed on IDEAS

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    1. Narayana R. Kocherlakota, 2010. "The New Dynamic Public Finance," Economics Books, Princeton University Press, edition 1, number 9222, December.
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    More about this item

    Keywords

    Immigration; optimal taxation; redistribution; Welfare state;

    JEL classification:

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

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