What is the Optimal Immigration Policy? Migration, Jobs and Welfare

63 Pages Posted: 20 Aug 2019

See all articles by Joao Guerreiro

Joao Guerreiro

Northwestern University

Sergio T. Rebelo

Northwestern University - Kellogg School of Management; Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)

Pedro Teles

Federal Reserve Bank of Chicago; Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 2 versions of this paper

Date Written: August 2019

Abstract

We study the immigration policy that maximizes the welfare of the native population in an economy where the government designs an optimal redistributive welfare system and supplies public goods. We show that when immigrants can be excluded from the welfare system, free immigration is optimal. It is also optimal to use the tax system to encourage the immigration of high-skill workers and discourage that of low-skill workers. When immigrants and natives must be treated alike, it is optimal to ban low-skill immigration and have free immigration for high-skill workers. However, high-skill workers may choose not to immigrate when there are heavy taxes levied on all high-skill workers, natives and immigrants alike. We use a calibrated version of the model to study how the optimal immigration policy responds to changes in the skill premia in the U.S. and abroad.

Keywords: Immigration, optimal taxation, redistribution, Welfare state

JEL Classification: F22, H21

Suggested Citation

Guerreiro, Joao and Tavares Rebelo, Sergio and Teles, Pedro, What is the Optimal Immigration Policy? Migration, Jobs and Welfare (August 2019). CEPR Discussion Paper No. DP13909. Available at SSRN: https://ssrn.com/abstract=3439463

Joao Guerreiro (Contact Author)

Northwestern University ( email )

2001 Sheridan Road
Evanston, IL 60208
United States

Sergio Tavares Rebelo

Northwestern University - Kellogg School of Management ( email )

2001 Sheridan Road
Leverone Hall
Evanston, IL 60208
United States
847-467-2329 (Phone)
847-491-5719 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Pedro Teles

Federal Reserve Bank of Chicago ( email )

230 South LaSalle Street
Chicago, IL 60604
United States
312-322-2947 (Phone)
312-322-2357 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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