Working Paper: CEPR ID: DP1091
Authors: Assaf Razin; Efraim Sadka
Abstract: Like any trade activity, migration tends to generate gains to all parties involved - the migrants as well as the native-born population. With a mal-functioning labour market, however, migration will exacerbate the imperfections in the market. Consequently, it may lead to losses to the native-born population which are typically quite sizeable. Another economic problem raised by migration is the additional toll imposed on the welfare-state income-distribution institutions. Being unable to exclude migrants from the various entitlement programmes and public services, the modern welfare state can find migration rather costly. These two economic considerations may help explain the resistance to migration despite the pure gains-from-trade benefits created by it. Immigration could be more beneficial to the native-born population when labour markets are better functioning and the welfare programmes are less comprehensive.
Keywords: International Migration; Investment in Human Capital; Skilled and Unskilled Labour; Demogrants; Income Taxes; Public Services
JEL Codes: F22; H11
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| migration (F22) | native wages (J15) |
| migration (F22) | native employment (J15) |
| migration (F22) | income distribution (D31) |
| wage rigidity (J31) | native income share (D33) |
| welfare state comprehensiveness (I38) | impact of migration on native welfare (F22) |
| migration (F22) | economic burden on welfare states (I38) |
| wage rigidity (J31) | resistance to migration (F22) |
| welfare programs (I38) | resistance to migration (F22) |