DP1091 Resisting Migration: Wage Rigidity and Income Distribution

Author(s): Assaf Razin, Efraim Sadka
Publication Date: January 1995
Keyword(s): Demogrants, Income Taxes, International Migration, Investment in Human Capital, Public Services, Skilled and Unskilled Labour
JEL(s): F22, H11
Programme Areas: International Macroeconomics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=1091

Like any trade activity, migration tends to generate gains to all parties involved - the migrants as well as the native-born population. With a mal-functioning labour market, however, migration will exacerbate the imperfections in the market. Consequently, it may lead to losses to the native-born population which are typically quite sizeable. Another economic problem raised by migration is the additional toll imposed on the welfare-state income-distribution institutions. Being unable to exclude migrants from the various entitlement programmes and public services, the modern welfare state can find migration rather costly. These two economic considerations may help explain the resistance to migration despite the pure gains-from-trade benefits created by it. Immigration could be more beneficial to the native-born population when labour markets are better functioning and the welfare programmes are less comprehensive.