DP11244 How Migration Can Change Income Inequality?
|Author(s):||Assaf Razin, Efraim Sadka|
|Publication Date:||April 2016|
|Programme Areas:||International Macroeconomics and Finance|
|Link to this Page:||cepr.org/active/publications/discussion_papers/dp.php?dpno=11244|
Motivated by the unique experience of Israel of a supply-side shock of skilled migration, and the concurrent rise in disposable income inequality, this paper develops a model which can explain the mechanism through which a supply-side shock of skilled migration can reshape the political-economy balance and the redistributive policies. First, it depresses the incentives for unskilled migrants to flow in, though they are still free to do so. Second, tax-transfer system becomes less progressive. Nonetheless, the unskilled native-born may well become better-off, even though they lose their political clout.