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

Optimal Immigration - Mirrleesian Taxation with Discrimination


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 the government can design different tax systems for immigrants and natives, 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, banning low-skill immigration and allowing free immigration for high-skill workers is optimal. However, there might be no high-skill immigration when heavy taxes are levied on all high-skill workers, both natives and immigrants.

Journal of Monetary Economics, Volume 113, 2020, Pages 61-87.

Media: our column at VOXEU.

Joao Guerreiro
Joao Guerreiro
Assistant Professor

I am a macroeconomist focusing in business cycles, fiscal policy, heterogeneity, and imperfect expectations. I am an Assistant Professor at UCLA.