Thursday, July 14, 2011

Should immigration quotas be traded?

We all want to end world poverty, and a particularly efficient way to do this is to allow the free movement of people. Unfortunately, this often puts a burden on the receiving country, and thus immigration limits are set. But there is clearly a positive externality on the other countries from allowing immigrants in, as long as the others also care about world poverty. This implies that immigration quotas should be set higher.

To make this happen, Jesús Fernández-Huertas Moraga and Hillel Rapoport suggest a system of tradable immigration quotas, that mimics the market for pollution quotas. There is one difference, though, as migrants have preferences on where to go. Thus, there is a global number of migration slots put on the market and countries can trade them, paying for a slot elsewhere if local costs of immigration are particularly high. A central assignment authority attributes migrants to countries following their preferences and a particular assignment scheme.

This market allows to extract the price of immigrants to the host country as well as price the benefit of migration to world social welfare. Unfortunately, it does not appear immune to strategic behavior, as most bilateral assignment problems. But it seems to be a very promising step towards a better world, especially in the light of potentially large migration following climate change.

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