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Welfare Magnet Hypothesis, Fiscal Burden and Immigration Skill Selectivity

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  • Assaf Razin

    () (Tel Aviv University and Cornell University, CEPR, NBER, and CES-ifo)

  • Jackline Wahba

    () (University of Southampton, CPC and IZA.)

Abstract

This paper revisits the magnet hypothesis and investigates the impact of the welfare generosity on the difference between skilled and unskilled migration rates. The main purpose of the paper is to assess the role of mobility restriction on shaping the effect of the welfare state generosity. In a free migration regime, the impact is expected to be negative on the skill composition of migrants while in a restricted mobility regime, the impact will be the opposite, as voters will prefer selective migration policies, favoring skilled migrants who tend to be net contributors to the fiscal system. We utilize the free labor movement within EUR (the EU, Norway and Switzerland) and the restricted movement from outside of the EUR to compare the free migration regime to the restricted migration regime. We find strong support for the "magnet hypothesis" under the free-migration regime, and the "fiscal burden hypothesis" under the restricted-migration regime even after controlling for differences in educational quality and returns to skills in source and host countries.

Suggested Citation

  • Assaf Razin & Jackline Wahba, 2012. "Welfare Magnet Hypothesis, Fiscal Burden and Immigration Skill Selectivity," Norface Discussion Paper Series 2012036, Norface Research Programme on Migration, Department of Economics, University College London.
  • Handle: RePEc:nor:wpaper:2012036
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    References listed on IDEAS

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    1. Phillip B. Levine & David J. Zimmerman, 1999. "An empirical analysis of the welfare magnet debate using the NLSY," Journal of Population Economics, Springer;European Society for Population Economics, vol. 12(3), pages 391-409.
    2. Docquier, Frédéric & Rapoport, Hillel & Salomone, Sara, 2012. "Remittances, migrants' education and immigration policy: Theory and evidence from bilateral data," Regional Science and Urban Economics, Elsevier, vol. 42(5), pages 817-828.
    3. Daron Acemoglu & Simon Johnson, 2005. "Unbundling Institutions," Journal of Political Economy, University of Chicago Press, vol. 113(5), pages 949-995, October.
    4. Borjas, George J, 1987. "Self-Selection and the Earnings of Immigrants," American Economic Review, American Economic Association, vol. 77(4), pages 531-553, September.
    5. Jan K. Brueckner, 1999. "Welfare Reform and the Race to the Bottom: Theory and Evidence," Southern Economic Journal, Southern Economic Association, vol. 66(2), pages 505-525, January.
    6. Serge Coulombe & Jean-Francois Tremblay, 2009. "Migration and Skills Disparities across the Canadian Provinces," Regional Studies, Taylor & Francis Journals, vol. 43(1), pages 5-18.
    7. Grogger, Jeffrey & Hanson, Gordon H., 2011. "Income maximization and the selection and sorting of international migrants," Journal of Development Economics, Elsevier, vol. 95(1), pages 42-57, May.
    8. Borjas, George J, 1999. "Immigration and Welfare Magnets," Journal of Labor Economics, University of Chicago Press, vol. 17(4), pages 607-637, October.
    9. De Giorgi, Giacomo & Pellizzari, Michele, 2009. "Welfare migration in Europe," Labour Economics, Elsevier, vol. 16(4), pages 353-363, August.
    10. Enchautegui, Maria E, 1997. "Welfare Payments and Other Economic Determinants of Female Migration," Journal of Labor Economics, University of Chicago Press, vol. 15(3), pages 529-554, July.
    11. McKinnish, Terra, 2007. "Welfare-induced migration at state borders: New evidence from micro-data," Journal of Public Economics, Elsevier, vol. 91(3-4), pages 437-450, April.
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    More about this item

    JEL classification:

    • F0 - International Economics - - General
    • F2 - International Economics - - International Factor Movements and International Business
    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration
    • H10 - Public Economics - - Structure and Scope of Government - - - General

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