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Optimal Immigration Policy: Permanent, Guest-Worker, or Mode IV?

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  • Schiff, Maurice

    (World Bank)

Abstract

Immigration continues to be on the forefront of the policy debate on both sides of the Atlantic. A number of reforms of permanent and guest-worker (GW) immigration programs are being considered, and the temporary movement of service providers under Mode IV (GATS) is being negotiated at the Doha Round of the WTO. This paper contributes to the debate by examining these programs in a model where the host country government maximizes its objective function with respect to three policy instruments: the share of migrants’ deferred income payment, the value of the bond employers must post and forfeit if GWs overstay, and the size of the program. Circular migration and illegal GWs’ status regularization are considered. The paper shows that i) the optimal value of the bond is zero, ii) Mode IV is preferable to GW migration; iii) the optimal policy package consists of Mode IV and permanent migration, and iv) incorporating circular migration improves the policy package. Additional policy implications are also provided.

Suggested Citation

  • Schiff, Maurice, 2007. "Optimal Immigration Policy: Permanent, Guest-Worker, or Mode IV?," IZA Discussion Papers 3083, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp3083
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    1. Amin, Mohammad & Mattoo, Aaditya, 2005. "Does temporary migration have to be permanent?," Policy Research Working Paper Series 3582, The World Bank.
    2. Jean-Marie Grether & Jaime de Melo & Tobias Müller, 2015. "The Political Economy of International Migration in a Ricardo–Viner Model," World Scientific Book Chapters, in: Developing Countries in the World Economy, chapter 17, pages 411-437, World Scientific Publishing Co. Pte. Ltd..
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    5. Dustmann, Christian, 1997. "Return migration, uncertainty and precautionary savings," Journal of Development Economics, Elsevier, vol. 52(2), pages 295-316, April.
    6. Grossman, Gene M & Helpman, Elhanan, 1994. "Protection for Sale," American Economic Review, American Economic Association, vol. 84(4), pages 833-850, September.
    7. Schiff, Maurice, 2002. "Love thy neighbor: trade, migration, and social capital," European Journal of Political Economy, Elsevier, vol. 18(1), pages 87-107, March.
    8. Holzmann, Robert & Munz, Rainer, 2004. "Challenges and opportunities of international migration for the EU, its member states, neighboring countries, and regions : a Policy Note," Social Protection Discussion Papers and Notes 30160, The World Bank.
    9. Ruhs, Martin & Chang, Ha-Joon, 2004. "The Ethics of Labor Immigration Policy," International Organization, Cambridge University Press, vol. 58(1), pages 69-102, February.
    10. Francisco L. Rivera-Batiz, 1999. "Undocumented workers in the labor market: An analysis of the earnings of legal and illegal Mexican immigrants in the United States," Journal of Population Economics, Springer;European Society for Population Economics, vol. 12(1), pages 91-116.
    11. Aaditya Mattoo & Antonia Carzaniga, 2003. "Moving People to Deliver Services," World Bank Publications - Books, The World Bank Group, number 15088.
    12. Philip Martin, 2003. "Managing International Labor Migration in the 21st Century," South-Eastern Europe Journal of Economics, Association of Economic Universities of South and Eastern Europe and the Black Sea Region, vol. 1(1), pages 9-18.
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    Cited by:

    1. Steffen Reinhold & Kevin Thom, 2013. "Migration Experience and Earnings in the Mexican Labor Market," Journal of Human Resources, University of Wisconsin Press, vol. 48(3), pages 768-820.
    2. Slobodan Djajić & Michael S. Michael, 2013. "Guest worker programs: A theoretical analysis of welfare of the host and source countries," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 22(3), pages 454-475, April.
    3. Gordon H. Hanson, 2009. "The Economic Consequences of the International Migration of Labor," Annual Review of Economics, Annual Reviews, vol. 1(1), pages 179-208, May.
    4. Gordon Hanson, 2010. "The Governance of Migration Policy," Journal of Human Development and Capabilities, Taylor & Francis Journals, vol. 11(2), pages 185-207.
    5. Jesus Fernandez-Huertas Moraga, 2008. "A General Model of Bilateral Migration Agreements," Working Papers 360, Barcelona School of Economics.
    6. Slobodan Djajić & Alexandra Vinogradova, 2015. "Overstaying Guest Workers and the Incentives for Return," CESifo Economic Studies, CESifo Group, vol. 61(3-4), pages 764-796.
    7. Docquier, Frédéric & Schiff, Maurice, 2008. "Measuring Skilled Emigration Rates: The Case of Small States," IZA Discussion Papers 3388, Institute of Labor Economics (IZA).
    8. Jacques Poot & Anna Strutt, 2010. "International Trade Agreements and International Migration," The World Economy, Wiley Blackwell, vol. 33(12), pages 1923-1954, December.
    9. Djajić, Slobodan & Mesnard, Alice, 2015. "Guest workers in the underground economy," Labour Economics, Elsevier, vol. 35(C), pages 53-62.
    10. repec:rsc:rsceui:2008/39 is not listed on IDEAS
    11. Wouterse, Fleur, 2012. "Migration and Rural Welfare: The Impact of Potential Policy Reforms in Europe," World Development, Elsevier, vol. 40(12), pages 2427-2439.
    12. Alessandra Venturini, 2008. "Circular Migration as an Employment Strategy for Mediterranean Countries," RSCAS Working Papers carim2008/39, European University Institute.
    13. Slobodan Djajic & Michael S. Michael, 2009. "Temporary Migration Policies and Welfare of the Host and Source Countries: A Game-Theoretic Approach," CESifo Working Paper Series 2811, CESifo.

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    More about this item

    Keywords

    permanent; Mode IV; guest-worker; immigration; overstaying;
    All these keywords.

    JEL classification:

    • F20 - International Economics - - International Factor Movements and International Business - - - General
    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration
    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers

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