The Governance of Migration Policy

In this paper, I examine high-income country motives for restricting immigration. Abundant evidence suggests that allowing labor to move from low-income to high-income countries would yield substantial gains in global income. Yet, most high-income countries impose strict limits on labor inflows and set their admission policies unilaterally. A core principle underlying the World Trade Organization is reciprocity in tariff setting. When it comes to migration from poor to rich countries, however, labor flows are rarely bidirectional, making reciprocity moot and leaving labor importers with all the bargaining power. One motivation for barriers to labor inflows is political pressure from groups that are hurt by immigration. Raising immigration would depend on creating mechanisms to transfer income from those that immigration helps to those that it hurts. Another motivation for immigration restrictions is that labor inflows from abroad may exacerbate distortions in an economy associated with redistributive tax and transfer policies. Making immigration more attractive would require creating mechanisms that limit the negative fiscal impacts of labor inflows on natives. Fiscal distortions create an incentive for receiving countries to screen immigrants according to their perceived economic impact. For high skilled immigrants, screening can be based on educational degrees and professional credentials, which are relatively easy to observe. For low skilled immigrants, illegal immigration represents an imperfect but increasingly common screening device. For policy makers in labor-importing nations, the modest benefits freer immigration brings may simply not be worth the political hassle. To induce high-income countries to lower border barriers, they need to get more out of the bargain.