The welfare economics of immigration law: a theoretical survey with an analysis of U.S. policy

Abstract

Much like tariffs and quotas, immigration restrictions are a form of protectionism, insulating domestic workers from competition in the labor market. Yet even the most ardent supporters of open markets usually stop short of advocating the abolition of immigration controls. Efforts to reduce barriers to the migration of labor were conspicuously absent, for example, from the Uruguay Round of GATT negotiations. It seems clear that immigration policy will remain a bastion of national sovereignty in international economic relations, ensuring the persistence of a wide range of uncoordinated and typically restrictive national regimes. This essay considers whether restrictive national immigration policies have sound economic justification. The heart of the inquiry is normative, embracing the conventional tools and assumptions of modern welfare economics to analyze the efficiency of immigration controls. An ancillary aspect of the inquiry is positive, exploring whether current policy can be understood as an effort by unconstrained sovereigns to pursue the national economic advantage, perhaps at the expense of other nations. The current immigration policy of the United States receives close attention. The economic issues are difficult to resolve, though more at an empirical than a theoretical level. Ultimately, any economic justification for immigration restrictions must rest on the presence of adverse external effects upon the world as a whole or the country of immigration. Theory identifies a variety of possibilities, though many are at best conjectural and fail to provide compelling support for a restrictive policy. Probably the most plausible argument for restrictions rests on the existence of entitlement programs in wealthier nations that may, depending upon how they are structured, induce inefficient migration from poorer nations.