On the Political Economy of Immigration and Income Redistribution*

Abstract

In this article, we analyze an economy in which agents vote over immigration policy and redistributive tax policy. We show that natives' preferences over immigration are influenced by the prospect that immigrants will be voting over future tax policy. 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 have dramatic effects on equilibrium immigration and tax policies. Finally, we provide some empirical support for the model's predictions.

Demographics and Factor Flows – A Political Economy Approach

“…Preferences may be reversed if immigrants receive political rights. This is also an important prediction of the dynamic models of Dolmas and Huffman (2004) and Ortega (2005). In our model, old capital owners' immigration preferences are limited, even though immigrants do not have any political rights.…”

“…Furthermore, franchise extensions may be based on rational motives, as Acemoglu and Robinson (2000) and Jack and Lagunoff (2006) show. Dolmas and Huffman (2004), Sand and Razin (2007) and Ortega (2005Ortega ( , 2010 argue that immigrants do in fact shape policy. Whereas Dolmas and Huffman (2004) and Ortega (2005Ortega ( , 2010 focus on how immigration influences redistribution policy, Sand and Razin (2007) also consider the impact of immigration on future immigration policy.…”

Migration and Welfare Systems – State of the Art and Research Challenges

“…In a similar, dynamic general equilibrium framework, Dolmas and Huffman (2004) analyse the impact of immigration on redistribution and migration policies. In their model, the natives, who differ only with respect to capital endowment, choose the immigrant quota in the first period.…”

“…His utility is thus decreasing with the number of immigrants, which translates to a 'zero immigration' policy in the equilibrium. Dolmas and Huffman (2004) note that if immigrants have even a small amount of capital, or if the income inequality among the host population is small, the resulting migration policy will be more liberal. In the case of capital mobility, an inflow of foreign investment alleviates the changes in factor rewards, which causes all voters to be indifferent about the level of immigration.…”

Social Preferences and Redistribution under Direct Democracy

“…Furthermore, host country residents can decide whether or not to allow franchise to the immigrants. Within these sort of models, Dolmas and Hu¤man (2004) …nd that the e¤ect of immigration on the size of the welfare state depends on the level of initial income inequality in the host country. Razin et al (2002) …nd that low skill immigration can reduce the level of redistribution.…”