Immigration control and the welfare state

Abstract

We examine immigration policy and its redistributive effects using a model of a rich country which must spend on boarder control in order to regulate immigration from a poor country. There are owners and workers in the rich country, and a public sector which makes redistributive transfers from owners to workers. We first consider the case where illegal immigrants have access to the public sector, a situation currently observed in many countries. We show that as border control becomes more expensive inequality in the rich country increases, redistributive transfers may increase or decrease, some immigration is permitted and foreign aid may be used by the rich country in order to reduce the migration pressure along its border with the poor country. Because of nonconvexities, we also show that a small decrease in the aversion to inequality or a small increase in the poor country's population can lead to illegal immigrants from the public sector (e.g. California Proposition 187). We find that the possibility of collapse vanishes and that the rich country takes the toughest official stance on immigration but does not enforce it with border controls.