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Optimal Immigration Policy: Permanent, Guest-Worker, or Mode IV?

  • Schiff, Maurice


    (World Bank)

Host countries have implemented permanent and guest-worker (GW) immigration programs in recent decades, while the temporary movement of service providers under Mode IV of the GATS is one of the issues being negotiated at the Doha Round of the WTO. Though decisions on what programs to adopt have acquired increased urgency, the task has been complicated by host countries’ concern with migrants’ massive overstaying in past GW programs. This paper contributes to the debate by examining these migration regimes in a model in which the host country maximizes an objective function with respect to i) the size of the migration program, and – in the case of temporary migration – ii) the value of a bond employers must buy and iii) the share of migrants’ income whose payment is deferred. The maximization also takes into account the impact of the policy on source country cooperation on illegal immigration, migrants’ incentives and their preference for overstaying. The model solves for the policy measures, the overstaying probability, and the level of illegal migration. The paper concludes that the optimal policy is a combination of Mode IV-type and permanent migration.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 2871.

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Length: 25 pages
Date of creation: Jun 2007
Date of revision:
Handle: RePEc:iza:izadps:dp2871
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  1. Epstein, Gil S & Hillman, Arye L. & Weiss, Avi, 1998. "Creating Illegal Immigrants," CEPR Discussion Papers 1796, C.E.P.R. Discussion Papers.
  2. Gene M. Grossman & Elhanan Helpman, 1992. "Protection For Sale," NBER Working Papers 4149, National Bureau of Economic Research, Inc.
  3. Holzmann, Robert & Munz, Rainer, 2004. "Challenges and opportunities of international migration for the EU, its member states, neighboring countries, and regions : a Policy Note," Social Protection Discussion Papers 30160, The World Bank.
  4. Constant, Amelie & Zimmermann, Klaus F, 2007. "Circular Migration: Counts of Exits and Years Away from the Host Country," CEPR Discussion Papers 6438, C.E.P.R. Discussion Papers.
  5. Dustmann, Christian, 1997. "Return migration, uncertainty and precautionary savings," Journal of Development Economics, Elsevier, vol. 52(2), pages 295-316, April.
  6. de Melo, Jaime & Grether, Jean-Marie & Müller, Tobias, 2001. "The Political Economy of International Migration in a Ricardo-Viner Model," CEPR Discussion Papers 2714, C.E.P.R. Discussion Papers.
  7. Ruhs, Martin & Chang, Ha-Joon, 2004. "The Ethics of Labor Immigration Policy," International Organization, Cambridge University Press, vol. 58(01), pages 69-102, February.
  8. Amin, Mohammad & Mattoo, Aaditya, 2005. "Does temporary migration have to be permanent?," Policy Research Working Paper Series 3582, The World Bank.
  9. Aaditya Mattoo & Antonia Carzaniga, 2003. "Moving People to Deliver Services," World Bank Publications, The World Bank, number 15088.
  10. Francisco L. Rivera-Batiz, 1999. "Undocumented workers in the labor market: An analysis of the earnings of legal and illegal Mexican immigrants in the United States," Journal of Population Economics, Springer, vol. 12(1), pages 91-116.
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