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The Political Economy of Immigrationa and Income Redistribution

  • Jim Dolmas

    (Federal Reserve Bank of Dallas)

  • Gregory W. Huffman

    ()

    (Department of Economics, Vanderbilt University)

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.

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File URL: http://www.accessecon.com/pubs/VUECON/vu03-w12.pdf
File Function: First version, 2003
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Paper provided by Vanderbilt University Department of Economics in its series Vanderbilt University Department of Economics Working Papers with number 0312.

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Date of creation: May 2003
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Handle: RePEc:van:wpaper:0312
Contact details of provider: Web page: http://www.vanderbilt.edu/econ/wparchive/index.html

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  1. 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.
  2. Benhabib, Jess, 1996. "On the political economy of immigration," European Economic Review, Elsevier, vol. 40(9), pages 1737-1743, December.
  3. 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.
  4. Backus, David K & Kehoe, Patrick J & Kydland, Finn E, 1992. "International Real Business Cycles," Journal of Political Economy, University of Chicago Press, vol. 100(4), pages 745-75, August.
  5. George J. Borjas, 1995. "The Economic Benefits from Immigration," Journal of Economic Perspectives, American Economic Association, vol. 9(2), pages 3-22, Spring.
  6. Baxter, Marianne & Crucini, Mario J, 1993. "Explaining Saving-Investment Correlations," American Economic Review, American Economic Association, vol. 83(3), pages 416-36, June.
  7. Topel, Robert H, 1994. "Regional Labor Markets and the Determinants of Wage Inequality," American Economic Review, American Economic Association, vol. 84(2), pages 17-22, May.
  8. Dolmas, Jim & Huffman, Gregory W., 1997. "The political economy of endogenous taxation and redistribution," Economics Letters, Elsevier, vol. 56(2), pages 223-227, October.
  9. Razin, A. & Sadka, E. & Swagel, P., 1998. "Tax Burden and Migration: a Political Economy Theory and Evidence," Papers 15-98, Tel Aviv.
  10. George J. Borjas & Richard B. Freeman & Lawrence F. Katz, 1996. "Searching for the Effect of Immigration on the Labor Market," NBER Working Papers 5454, National Bureau of Economic Research, Inc.
  11. 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 226-45, March.
  12. Borjas, G.J. & Freeman, R.B. & Katz, L.F., 1991. "On The Labor Market Effects Of Immigration And Trade," Harvard Institute of Economic Research Working Papers 1556, Harvard - Institute of Economic Research.
  13. David Card, 1989. "The Impact of the Mariel Boatlift on the Miami Labor Market," Working Papers 633, Princeton University, Department of Economics, Industrial Relations Section..
  14. Michael Ben-Gad, 2000. "An Analysis of Immigration in a Dynamic Macroeconomic Model," Econometric Society World Congress 2000 Contributed Papers 0195, Econometric Society.
  15. Jim Dolmas & Gregory W. Huffman, 1997. "On the political economy of immigration," Working Papers 9706, Federal Reserve Bank of Dallas.
  16. Deininger, Klaus & Squire, Lyn, 1996. "A New Data Set Measuring Income Inequality," World Bank Economic Review, World Bank Group, vol. 10(3), pages 565-91, September.
  17. Alex Cukierman & Zvi Hercowitz & David Pines, 1994. "The Political Economy of Immigration," Public Economics 9405002, EconWPA.
  18. Kjetil Storesletten, 2000. "Sustaining Fiscal Policy through Immigration," Journal of Political Economy, University of Chicago Press, vol. 108(2), pages 300-323, April.
  19. David Backus & Patrick J. Kehoe & Finn E. Kydland, 1992. "Dynamics of the Trade Balance and the Terms of Trade: The S-Curve," NBER Working Papers 4242, National Bureau of Economic Research, Inc.
  20. Persson, T. & Tabellini, G., 1993. "Is Inequality Harmful for Growth," Papers 537, Stockholm - International Economic Studies.
  21. George J. Borjas, 1994. "The Economics of Immigration," Journal of Economic Literature, American Economic Association, vol. 32(4), pages 1667-1717, December.
  22. James F. Dolmas & Gregory W. Huffman, 2000. "The dynamics of immigration policy with wealth-heterogeneous immigrants," Working Papers 0006, Federal Reserve Bank of Dallas.
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