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Managing Migration through Quotas: an Option-theory Perspective

  • Michele Moretto

    (University of Padua)

  • Sergio Vergalli

    (University of Brescia)

Recent European Legislation on immigration has revealed a particular paradox on migration policies. On the one hand, the trend of recent legislation points to the increasing closure of frontiers (OECD 1999, 2001,2004), also by using immigration quotas. On the other hand, there is an increase of regularization, i.e., European policies are becoming less tight. Our aim here is to study these counterbalanced and opposite policies in European immigration legislation in a unified framework . To do this, we have used a real option approach to migration choice that assumes that the decision to migrate can be described as an irreversible investment decision where quotas represent an upper bound limit. Our results show that the paradox of counterbalancing immigration policies is not odd but it could be in line with an optimal policy to control migration inflow. In particular, we show that if the government controls the information related to the immigration quota system it could delay the mass entry of immigrants maintaining, in the long run, the required immigration stock and controlling the flows in the short-run.

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Paper provided by Fondazione Eni Enrico Mattei in its series Working Papers with number 2008.51.

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Date of creation: Jun 2008
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Handle: RePEc:fem:femwpa:2008.51
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  1. M. C. Burda, 1995. "Migration and the Option Value of Waiting," SFB 373 Discussion Papers 1995,58, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
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  14. Bartolini, Leonardo, 1995. "Foreign investment quotas and rent extraction under uncertainty," Journal of International Economics, Elsevier, vol. 38(1-2), pages 25-49, February.
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  18. Timothy J. Hatton, 2004. "Seeking asylum in Europe," Economic Policy, CEPR;CES;MSH, vol. 19(38), pages 5-62, 04.
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