What is the optimal immigration policy? Migration, jobs, and welfare

Joao Guerreiro, Sergio Rebelo*, Pedro Teles

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

Abstract

We study the immigration policy that maximizes the welfare of the native population in an economy where the government designs an optimal redistributive welfare system and supplies public goods. We show that when the government can design different tax systems for immigrants and natives, free immigration is optimal. It is also optimal to use the tax system to encourage the immigration of high-skill workers and discourage that of low-skill workers. When immigrants and natives must be treated alike, banning low-skill immigration and allowing free immigration for high-skill workers is optimal. However, there might be no high-skill immigration when heavy taxes are levied on all high-skill workers, both natives and immigrants.

Original languageEnglish (US)
Pages (from-to)61-87
Number of pages27
JournalJournal of Monetary Economics
Volume113
DOIs
StatePublished - Aug 2020

Keywords

  • Immigration
  • Optimal taxation
  • Redistribution
  • Welfare state

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics

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