A Critical Comparison of Migration Policies: Entry Fee Versus Quota

ZEF - Discussion Papers on Development Policy No. 238

59 Pages Posted: 8 Aug 2017

See all articles by Oded Stark

Oded Stark

University of Bonn; University of Warsaw; University of Tuebingen; Georgetown University

Lukasz Byra

University of Warsaw - Faculty of Economic Sciences

Alessandra Casarico

Bocconi University - Department of Policy Analysis and Public Management

Silke Uebelmesser

University of Jena - School of Economics and Business Administration; CESifo (Center for Economic Studies and Ifo Institute)

Date Written: July 31, 2017

Abstract

We ask which migration policy a developed country will choose when its objective is to attain the optimal skill composition of the country’s workforce, and when the policy menu consists of an entry fee and a quota. We compare these two policies under the assumptions that individuals are heterogeneous in their skill level as well as in their skill type, and that individuals of one skill type, say “scientists,” confer a positive externality on overall productivity whereas individuals of the other skill type, say “managers,” do not confer such an externality. We find that a uniform entry fee encourages self-selection such that the migrants are only or mostly highly skilled managers. The (near) absence of migrant scientists has a negative effect on the productivity of the country’s workforce. Under a quota: the migrants are (a) only averagely skilled managers if the productivity externality generated by the scientists is weak, or (b) only averagely skilled scientists if the productivity externality generated by the scientists is strong. In (a), a uniform entry fee is preferable to a quota. In (b), a quota is preferable to a uniform entry fee. If, however, the entry fee for scientists is sufficiently below the entry fee for managers, then migrants will be only or mostly highly skilled scientists, rendering a differentiated entry fee preferable to a quota even when the productivity externality is strong. Instituting a differentiated fee comes, though, at a cost: the fee revenue is not as high as it will be when migrants are only or mostly managers. We conclude that if maximizing the revenue from the entry fee is not the primary objective of the developed country, then a differentiated entry fee is the preferred policy.

Keywords: International migration; A quota; A uniform entry fee; A differentiated entry fee; Heterogeneous human capital; Optimal skill composition of the developed country’s workforce; Total factor productivity

JEL Classification: D62; F22; J24

Suggested Citation

Stark, Oded and Byra, Lukasz and Casarico, Alessandra and Uebelmesser, Silke, A Critical Comparison of Migration Policies: Entry Fee Versus Quota (July 31, 2017). ZEF - Discussion Papers on Development Policy No. 238. Available at SSRN: https://ssrn.com/abstract=3014691 or http://dx.doi.org/10.2139/ssrn.3014691

Oded Stark (Contact Author)

University of Bonn ( email )

Walter-Flex-Str. 3
Bonn, NRW 53113
Germany

University of Warsaw ( email )

Dluga Street 44/50
Warsaw, 00-241
Poland

University of Tuebingen

Wilhelmstr. 19
Tuebingen, Baden Wuerttemberg 72074
Germany

Georgetown University ( email )

Washington, DC 20057
United States

Lukasz Byra

University of Warsaw - Faculty of Economic Sciences ( email )

Dluga Street 44/50
Warsaw, 00-241
Poland
+48 22 55 49 111, +48 22 55 49 (Phone)
+48 22 831 28 46 (Fax)

Alessandra Casarico

Bocconi University - Department of Policy Analysis and Public Management ( email )

Via Roentgen 1
Milan, 20136
Italy

Silke Uebelmesser

University of Jena - School of Economics and Business Administration ( email )

Carl-Zeiss-Str. 3
D-07743 Jena
Germany

CESifo (Center for Economic Studies and Ifo Institute) ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

HOME PAGE: http://www.CESifo.de

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