Time-consistent immigration policy under economic and cultural externalities

Alberto Bisin, Giulio Zanella

    Research output: Contribution to journalArticle

    Abstract

    Discussions of immigration policy are typically framed in the context of their economic effects in receiving countries, notably labour market and fiscal effects. In this paper, we characterize immigration policy in a richer model where migrants are also a source of cultural externalities stemming from either preferences or the functioning of formal and informal institutions in receiving countries. While in terms of pure economic effects, immigrants do not generally have any more incentives than low-skilled natives to allow for more immigration in the future, this is not the case when accounting for cultural externalities. Therefore, insofar as past immigrants have a voice in affecting future policies, a time-consistent immigration policy entails back-loading; as natives attempt at limiting voice of immigrants in the future, the economic effects of immigration flows as well as the cultural externality they introduce. Furthermore, natives exploit any pre-commitment device to limit immigration flows, e.g. building ''walls'', limiting immigrants' political rights, or accumulating fiscal surpluses.

    Original languageEnglish (US)
    Pages (from-to)415-446
    Number of pages32
    JournalEconomic Policy
    Volume32
    Issue number91
    DOIs
    StatePublished - 2017

    ASJC Scopus subject areas

    • Economics and Econometrics
    • Management, Monitoring, Policy and Law

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