PUBLIC FINANCE AND INDIVIDUAL PREFERENCES OVER GLOBALIZATION STRATEGIES

Do preferences toward globalization strategies vary across public‐finance regimes? In this paper, we use data on individual preferences toward immigration and trade policy to examine how pre‐tax and post‐tax cleavages differ across globalization strategies and state fiscal jurisdictions. High exposure to immigrant fiscal pressures reduces support for freer immigration among U.S. natives, especially the more skilled. The magnitude of this post‐tax fiscal cleavage is comparable to the pre‐tax labor‐market effects of skill itself. There is no public‐finance variation in opinion over trade policy, consistent with U.S. trade policy having negligible fiscal‐policy impacts. Public finance thus appears to shape opinions toward globalization strategies.     

The Immigration Policy Puzzle

This paper revisits the puzzle of immigration policy: standard economic theory predicts that free immigration improves natives' welfare, but (with few historical exceptions) an open door policy is never implemented in practice. What rationalizes the puzzle? We first review the model of immigration policy where the policy maker maximizes national income of natives net of the tax burden of immigration. We show that this model fails to provide realistic policy outcomes when the receiving region's technology is described by a standard Cobb–Douglas or CES function. Then we describe three extensions of this basic model that reconcile theory with evidence. The first introduces a cost of integration of the immigrant community in the destination country; the second takes into account the policy maker's redistributive concern across different social groups; the last extension considers positive spillover effects of (skilled) migrants on the receiving economy.     

THE NON‐TRADED SECTOR,LOBBYING, AND THE CHOICE BETWEEN THE CUSTOMS UNION AND THE COMMON MARKET

This paper models immigration policy as the outcome of political competition between interest groups representing individuals employed in different sectors. In standard positive theory, restrictive immigration policy results from a low‐skilled median voter voting against predominantly low‐skilled immigration. In the present paper, in contrast, once trade policies are liberalized, restrictive immigration policy results from anti‐immigration lobbying by interest groups representing the non‐traded sectors. It is shown that this is in line with empirical regularities from recent episodes of restrictive immigration legislation in the European Union. It is further shown that if governments negotiate bilaterally over trade and migration policy regimes, the equilibrium regime depends (i) on the sequencing of the international negotiation process and (ii) on the set of available trade and migration policy regimes. In particular, the most comprehensive and most welfare‐beneficial type of liberalization may be rejected only because a less comprehensive type of liberalization is available.     

Are choice experiments reliable? Evidence from the lab

This study investigates whether a popular stated preference method, the choice experiment (CE), reliably measures individuals’ values for a good. We address this question using an induced value experiment. Our results indicate that CEs fail to elicit payoff maximizing choices. We find little evidence that increasing the salience of the choices or adding monetary incentives increase the proportion of payoff maximizing choices. This questions the increasing use of CE to value non-market goods for policy making.     

Dualistic Discourse and Immigration Policy

Abstract:

The central question in immigration policy is whether to support less immigration through more “restrictive” laws and procedures or whether to support more immigration through a “relaxation” of existing laws. Recently, however, a second debate has arisen on one side of this debate regarding the appropriate types of arguments that may be used to support “restrictive” immigration. Ross Douthat refers to this dispute as the “race versus economics” question: using “race-based” arguments is not legitimate; while an “economic” or a “fact-based” argument is regarded as legitimate. We argue that this distinction in anti-immigration rhetoric is more apparent than real. Using the two most common historical “tropes” in immigration policy, “criminal” and “worker,” we find that racist, anti-ethnic, and classist assumptions pervade U.S. immigration law and policy and have been far more influential in formulating actual policy than either economic or “fact-based” analysis. The central problem with restrictive immigration policy is that its primary purpose is to determine who is eligible to be an American, and who is not; in other words, immigration policy is, by its fundamental intent, invidious. The question is whether it is possible to exclude individuals on these “legitimate” grounds without relying on “illegitimate” invidious distinctions?     

IMMIGRATION POLICY, CULTURAL PLURALISM AND TRADE: EVIDENCE FROM THE WHITE AUSTRALIA POLICY

Abstract.   Examining data for Australia and 101 trading partners that span the years 1989–2000, we find immigrants from nations afforded preference under the White Australia policy exert greater proportional influences on Australian imports from their home countries compared to immigrants from nations not privy to such preference. Immigrants from this latter group of countries influence Australian exports to their home countries proportionally more than do immigrants from the former group. We also find immigrant-trade links vary across disaggregated measures of trade. The results suggest that cultural diversity, affected here by immigration policy, is relevant to a nation's trade patterns.     

Wish you were here? Quasi-experimental evidence on the effect of education on self-reported attitude toward immigrants

We use European Social Survey and Labour Force Survey data from 2002 to 2012 to estimate the causal effect of years of education on European natives׳ opinion toward immigration, by exploiting the exogenous discontinuity generated by reforms in compulsory education in Europe in the 1940s through the 1990s. Our findings show that higher levels of education lead to a more positive reported attitude toward immigrants. We also investigate the mechanisms behind the effect of education on reported attitudes by evaluating both economic and non-economic channels. We find that higher levels of education place individuals in occupations that are less exposed to the negative effects of migration, although not in sectors/occupations where the share of migrants is necessarily smaller, suggesting that migrants and low-educated natives may be complementary rather than substitutes in the labour market. In addition, education alters values and the cognitive assessment of the role of immigration in host societies, with a positive effect on reported attitude toward diversity and on the assessment of immigration׳s role in host countries. Our findings suggest that education as a policy instrument can increase social cohesion in societies that are subject to large immigration flows.     

The Effects of Issue Salience on Political Decision-making

Game-theoretic models of political decision-making regard policy outcomes as a combined result of actor preferences and institutions. This paper explores the effects of adding relative issue salience to the analysis. I focus on non-cooperative models of complete and perfect information that are based on the concept of structure-induced equilibrium (Shepsle in Am J Polit Sci 23(1):27–59, 1979). Assuming a progressive agenda-setter and two conservative voters, I show how a change of the relative issue salience for players in a game results in a different equilibrium outcome in a political decision-making body.     

Preference-directed regulation when ethical environmental policy choices are formed with limited information

Preference-directed regulation (PDR) can supplement traditional environmental policies through frequent regulatory revision (Livermore, Va Environ Law J 25:311–386, 2007). Using original survey data, PDR is operationalized via counterfactual simulations within a limited information discrete choice model. Augmenting individual opinions about one of the three policies at driving environmental outcomes, stakeholders can induce preference switching in favor of or in detriment to a specific policy. The three policies are summarized as: (1) ban; (2) tax; and (3) label. The resulting substitution patterns demonstrate that the extent of preference switching between policies depends on the relative change in individual opinions about a policy. Furthermore, different forms of PDR may be more effective at inducing preference switching in favor of or in detriment to a specific policy.     

Illegal Immigration and Second-best Import Tariffs

A version of the small‐union Meade model is presented to analyze the illegal immigration problem in the context of import tariffs. Two possible host nation objectives are considered: (i) to control the level of illegal immigration to a given target; or (ii) to choose an illegal immigration level that maximizes national welfare. Available policy instruments are import tariffs/subsidies, border, and internal enforcement levels. The second‐best tariff on imports from the source nation (for illegal immigration) can be of either sign. It depends on the effect of the tariff on the wage rate and the pattern of substitutability in consumption. In scenario (ii), greater enforcement may be justified if it reduces labor inflow and thereby contracts the protected sector. If enforcement is too costly, tariff policy may substitute for it to exploit monopsony power in the labor market and to counter the distortionary effects of labor flows.     

U.S. IMMIGRATION REFORM: POLICY ISSUES AND ECONOMIC ANALYSIS

In recent years, legal U. S. immigration has approached historically high levels, and illegal immigration has been thought to be high and perhaps rising. Consequently, the Select Commission on Immigration and Refugee Policy proposed sweeping changes in the nation's immigration laws. During 1984, both the Senate and House passed the Immigration Reform and Control Act (Simpson-Mazzoli Bill). This bill subsequently died in the conference committee that was established to reconcile differences between the bill's two versions. The proposed act has three major provisions: (1) control of illegal immigration, (2) legalization of alienstatus, and (3) reform of legal immigration. Both the House and Senate versions would maintain the present orientation of U.S. immigration policy toward family reunification, but the Senate proposed significant changes in legal immigration restrictions that would shift policy slightly more toward labor considerations. These proposed changes were eliminated in the compromise made in the conference committee. Employer sanctions and legalization of illegal aliens were left as the two most prominent alterations to existing policy. During 1985, the 99th Congress is likely to reconsider the Simpson-Mazzoli Bill, perhaps in a streamlined version which emphasizes employer sanctions, legalization, and a substantial increase in border enforcement.     

More than Additions to Population: The Economic and Fiscal Impact of Immigration

In the conceptual framework of the Intergenerational Reports, immigration features as an exogenous input into the size of the population and its composition by age and sex. There are good reasons for believing that immigration has sizeable endogenous components, that attributes other than age and sex distinguish immigrants from the native‐born, as well as from each other, and that these features are of significant economic and fiscal import. Last, it is suggested that, in the context of an ageing population, we may learn much about the effectiveness of different policy responses in achieving fiscal sustainability—as well as immigration policy—through a dynamic life cycle accounting approach.     

ON THE POLITICAL ECONOMY OF IMMIGRATION AND INCOME REDISTRIBUTION*

In this article, we analyze an economy in which agents vote over immigration policy and redistributive tax policy. We show that natives' preferences over immigration are influenced by the prospect that immigrants will be voting over future tax policy. We also show that changes in the degree of international capital mobility, the distribution of initial capital among natives, the wealth or poverty of the immigrant pool, and the future voting rights and entitlements of immigrants can have dramatic effects on equilibrium immigration and tax policies. Finally, we provide some empirical support for the model's predictions.     

Dynamic effects of changes to Japanese immigration policy

This paper uses a single-sector dynamic stochastic general equilibrium model with heterogeneous households to analyse Japanese immigration policy. We examine the effects on output, consumption, factor prices, and utility. We do this for both steady states and transition paths. We find that: (a) aggregate output, investment, and consumption in Japan are likely to rise with any sort of loosening of immigration restrictions; (b) allowing more skilled immigration generates greater aggregate changes; (c) raising skilled immigration relative to unskilled immigration drives down skilled workers’ wages, consumption, and utility, while cutting the skilled to unskilled immigration share has the opposite effects; and (d) such immigration policy changes have small effects compared to those that occur naturally due to business cycle fluctuations     

Immigration policy index

The immigration policy index is based on three types of entry visa restrictions: visa required, visa not required for short stays and visa not required. I identify country pairs which changed their visa regime during 2000–2010 and find that the weakening of visa policy is associated with a 10 percent increase in migrant stocks and a significant shift towards male and less skilled migration from policy affected source countries. In contrast, the tightening of visa policy is not related to a significant change in migrant stocks, their gender or skill composition. The result suggests the existence of immigration policy hysteresis.     

Do Economists Have a Fatherland? How Global and National Efficiency Considerations Influence Economists’ Policy Judgements

This study evaluates whether economists support economic policies such as free trade because they deem them to be good for their home country or because they increase global welfare. In a telephone survey, 100 German economists were asked to judge different policy proposals dealing with immigration, military exports and climate policy. Our results show that the acceptance of the policy proposals is strongly influenced by national efficiency judgements. In contrast, global efficiency judgements exert no significant positive effect on policy proposal acceptance. These effects even hold for economists who self‐reported a global perspective in the assessment of the policy proposals. These judgements might be based on the potentially erroneous assumption that their policy judgements, taken from a national perspective, are consistent with global interests.     

How does immigration affect modes of foreign market access: trade and FDI?

This article presents a study of the effects of immigration on trade and FDI. Our analysis is distinct from previous work because it systematically examines the interactions between immigration, trade and FDI. Previous studies treated FDI–immigration relationships as being independent of the modes of foreign market access. Using bilateral data of Japan and 28 other economies for the period 1996–2011, our analysis shows that FDI inflows become more dominant compared to imports when skilled immigration flows increase and less dominant when unskilled immigration flows increase. The results suggest that the relevant policy instruments as regards the promotion of trade, FDI and immigration should vary depending on economic goals, such as current account balances and labour shortages.     

Aging,Factor Returns,and Immigration Policy

Immigration has various economic and non‐economic effects on the destination country's inhabitants. In this paper, we focus on the impact of immigration on factor returns and analyze how aging affects immigration policy, employing a dynamic political‐economy model of representative democracy. Aging, that is, a decline in the growth rate of the native population, has an expansionary effect on immigration in this framework. This immigration effect may even overcompensate the initial contraction of the labor force. We show that the immigration rate in the representative democracy equilibrium exceeds the immigration rate that would maximize welfare of current and future generations, and we also discuss the influence of social security on immigration policy.     

Immigration quotas and skill upgrading

A reason why immigration policy is such a contended issue is that often immigrants end up obtaining the right to vote and, hence, may affect future policies. This paper offers a dynamic, general equilibrium model of immigration policy. In each period, a heterogeneously skilled population chooses an immigration policy by majority vote. Voters anticipate that immigration affects the skill premium and the skill composition of the electorate. The main insight is the existence of a trade-off between skill complementary immigration and the resulting shift in political power. I argue that a reasonably parameterized version of the model is consistent with the main features of US immigration.     

Does immigration crowd out foreign direct investment inflows? Tradeoff between contemporaneous FDI-immigration substitution and ethnic network externalities

This study examines the dynamic interactions between immigration and inward foreign direct investment (FDI) using bilateral data on these indicators between Japan and each of the 29 countries/economies of origin for both FDI and immigrants into Japan during 1996–2011. Although literature shows a positive FDI–migration relationship, I distinguish between short- and long-term effects of immigration, and show a contemporaneous negative relationship between FDI and immigration. The results show that immigration flows discourage FDI inflows (FDI–migration substitution), although larger immigration stocks induce FDI inflows (ethnic network externalities). Therefore, total effects need to be evaluated considering a tradeoff between contemporaneous substitution and the longer-term complementarity from network effects. While inward FDI promotion and immigration enhancement are often suggested as solutions to resolving shortages in domestic savings and labor, our results have implications for addressing the increasingly daunting policy issue of population aging.