Working Paper: NBER ID: w22191
Authors: Assaf Razin; Efraim Sadka
Abstract: Motivated by the unique experience of Israel of a supply-side shock of skilled migration, and the concurrent rise in disposable income inequality, this paper develops a model which can explain the mechanism through which a supply-side shock of skilled migration can reshape the political-economy balance and the redistributive policies. First, it depresses the incentives for unskilled migrants to flow in, though they are still free to do so. Second, tax-transfer system becomes less progressive. Nonetheless, the unskilled native-born may well become better-off, even though they lose their political clout.
Keywords: Migration; Income Inequality; Political Economy
JEL Codes: F22; H0; J0
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| influx of skilled migrants (F22) | incentives for unskilled migrants (J68) |
| influx of skilled migrants (F22) | overall productivity (O49) |
| overall productivity (O49) | tax-transfer system progressivity (H23) |
| proportion of skilled workers (J24) | political coalition (D71) |
| political coalition (D71) | redistributive policies (H23) |
| influx of skilled migrants (F22) | capital income for unskilled native-born individuals (J69) |