Optimal Immigration Policy: When the Public Good is Rival

Journal article: In this model, we characterize optimal immigration and fiscal policies in the presence of a rival public good and heterogeneous discounting. Surprisingly, even if the government is benevolent towards natives only, it is optimal to keep borders open. Indeed, in the long run, patient natives hold the whole stock of capital, while impatient immigrants work. Moreover, since capital intensity is stationary, capital per native, consumption and the public good increase with the number of (immigrant) workers. This positive effect offsets the disutility deriving from the congestion of the public good. However, when we account for the costs associated with cultural heterogeneity, we find that it is optimal to regulate immigration inflows. We also analyze the long-run sensitivity of the optimal policy mix with respect to the fundamentals.

Author(s)

Stefano Bosi, Eleni Iliopulos, Hubert Jayet

Journal
  • Japanese Economic Review
Date of publication
  • 2011
Keywords JEL
D91 E32 H41 J61
Keywords
  • Immigration
Pages
  • 460-484
Version
  • 1
Volume
  • 62