The Vicious Circle of Xenophobia: Immigration and Right-Wing Populism

We investigate the bidirectional relationship between immigration and right-wing populism, which we characterize as a self-reinforcing dynamic process where anti-immigrant rhetoric and populist policies lead to a deterioration in the average education and skill level of immigrants. The deterioration in the ratio of high-skill to low-skill immigrants in turn fuels populist support and anti-immigration attitudes, creating what we call "the vicious circle of xenophobia". We review some historical and contemporary studies that are suggestive of such vicious circle. In particular, recent cross-country evidence shows that low-skill immigration tends to exacerbate populism, while high-skill immigration tends to mitigate it. Conversely, populist policies and xenophobic attitudes have a strong repulsive effect on highly-skilled immigrants and result in adverse immigrant selection. We use the empirical results from those studies to inform a theoretical model of joint determination of immigrants' skill-ratio and right-wing populism levels. The model displays multiple equilibria, with the inferior equilibrium – corresponding to our vicious circle -- characterized by high levels of right-wing populism and a high proportion of low-skill workers among immigrants. In this framework, structural trends such as internet penetration, economic erosion of the middle class, demographic pressure from poor countries as well as adverse cyclical shocks make the good, efficient equilibrium less likely and the inferior equilibrium of explosive populism and deteriorated immigrants' skill-ratio more likely.