Social Capital, Trade and Optimal Migration Policy

Abstract:     
The movement of people differs from the movement of goods and services because people create attachments with those with whom they share social capital, including norms, language, customs, values and culture. South-North migration affects social capital in both places. Four types of externalities associated with migration are identified. The paper examines the impact of free migration and of immigration policy under alternative assumptions about internalization of these externalities. The effects of trade policy, illegal migration and changes in migration costs are also analyzed. Irrespective of the degree of internalization of these externalities, two unambiguous results are that the North gains from immigration controls and the South gains from trade liberalization.

Number of Pages in PDF File: 34

JEL Classification: F11, F13, F22, J61

working papers series