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The Political Economy of Immigrationa and Income Redistribution

Author

Listed:
  • Jim Dolmas

    (Federal Reserve Bank of Dallas)

  • Gregory W. Huffman

    () (Department of Economics, Vanderbilt University)

Abstract

In this paper, we study several general equilibrium models in which the agents in an economy must decide on the appropriate level of immigration into the country. Immigration does not enter directly into the native agents' utility functions, and natives have identical preferences over consumption goods. However, natives may be endowed with different amounts of capital, which alone gives rise to alternative levels of desired immigration. We show that the natives' preferences over desired levels of immigration are influenced by the prospect that new immigrants will be voting in the future, which may lead to higher taxation to finance government spending from which they will benefit. We also show that changes in the degree of international capital mobility, the distribution of initial capital among natives, the wealth or poverty of the immigrant pool, and the future voting rights and entitlements of immigrants can all have a dramatic effect on the equilibrium immigration and taxation policies. Both the model and the empirical evidence support the notion that inequality can lead to reduced immigration. The results suggest that opposition to immigration can be mitigated by enhanced capital mobility, as well as from removing some of the benefits that immigrants ultimately receive, either in the form of government transfers, or the franchise to vote.

Suggested Citation

  • Jim Dolmas & Gregory W. Huffman, 2003. "The Political Economy of Immigrationa and Income Redistribution," Vanderbilt University Department of Economics Working Papers 0312, Vanderbilt University Department of Economics.
  • Handle: RePEc:van:wpaper:0312
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    References listed on IDEAS

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    1. Backus, David K & Kehoe, Patrick J & Kydland, Finn E, 1994. "Dynamics of the Trade Balance and the Terms of Trade: The J-Curve?," American Economic Review, American Economic Association, vol. 84(1), pages 84-103, March.
    2. Razin, Assaf & Sadka, Efraim & Swagel, Phillip, 2002. "Tax burden and migration: a political economy theory and evidence," Journal of Public Economics, Elsevier, vol. 85(2), pages 167-190, August.
    3. James Dolmas & Gregory W. Huffman, 2000. "The dynamics of immigration policy with wealth-heterogeneous immigrants," Working Papers 0006, Federal Reserve Bank of Dallas, revised 2000.
    4. Kjetil Storesletten, 2000. "Sustaining Fiscal Policy through Immigration," Journal of Political Economy, University of Chicago Press, vol. 108(2), pages 300-323, April.
    5. David Backus & Patrick Kehoe & Finn Kydland, 1992. "Dynamics of the trade balance and the terms of trade: the J-curve revisited," Discussion Paper / Institute for Empirical Macroeconomics 65, Federal Reserve Bank of Minneapolis.
    6. George J. Borjas, 1995. "The Economic Benefits from Immigration," Journal of Economic Perspectives, American Economic Association, vol. 9(2), pages 3-22, Spring.
    7. Mendoza, Enrique G & Tesar, Linda L, 1998. "The International Ramifications of Tax Reforms: Supply-Side Economics in a Global Economy," American Economic Review, American Economic Association, vol. 88(1), pages 226-245, March.
    8. Jim Dolmas & Gregory W. Huffman, 2004. "On The Political Economy Of Immigration And Income Redistribution," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 45(4), pages 1129-1168, November.
    9. Kenneth F. Scheve & Matthew J. Slaughter, 2001. "Labor Market Competition And Individual Preferences Over Immigration Policy," The Review of Economics and Statistics, MIT Press, vol. 83(1), pages 133-145, February.
    10. James Dolmas & Gregory W. Huffman, 1997. "On the political economy of immigration," Working Papers 9706, Federal Reserve Bank of Dallas.
    11. Maurice Obstfeld & Kenneth S. Rogoff, 1996. "Foundations of International Macroeconomics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262150476.
    12. Dolmas, Jim & Huffman, Gregory W., 1997. "The political economy of endogenous taxation and redistribution," Economics Letters, Elsevier, vol. 56(2), pages 223-227, October.
    13. Michael Ben-Gad, 2000. "An Analysis of Immigration in a Dynamic Macroeconomic Model," Econometric Society World Congress 2000 Contributed Papers 0195, Econometric Society.
    14. George J. Borjas & Richard B. Freeman & Lawrence F. Katz, 1992. "On the Labor Market Effects of Immigration and Trade," NBER Chapters, in: Immigration and the Work Force: Economic Consequences for the United States and Source Areas, pages 213-244, National Bureau of Economic Research, Inc.
    15. Mendoza, Enrique G, 1991. "Real Business Cycles in a Small Open Economy," American Economic Review, American Economic Association, vol. 81(4), pages 797-818, September.
    16. Wellisch, Dietmar & Wildasin, David E., 1996. "Decentralized income redistribution and immigration," European Economic Review, Elsevier, vol. 40(1), pages 187-217, January.
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    Cited by:

    1. Assaf Razin & Efraim Sadka & Benjarong Suwankiri, 2009. "Migration and the welfare state: Dynamic Political-Economy Theory," NBER Working Papers 14784, National Bureau of Economic Research, Inc.
    2. Robert Duval-Hernandez & Ferran Martinez i Coma, 2012. "Immigrants' rights and benefits. A public opinion analysis for Spain," University of Cyprus Working Papers in Economics 15-2012, University of Cyprus Department of Economics.

    More about this item

    Keywords

    Capital mobility; immigration; political economy; taxation; voting;

    JEL classification:

    • D7 - Microeconomics - - Analysis of Collective Decision-Making
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration
    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers

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