Migration and Redistribution: Why the Federal Governance of an Economic Union Matters

Assaf Razin and Efraim Sadka

No 22329, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Federal governance matters. Policy coordination allows the economic union to exercise monopsony power over migrants. Therefore the migration volumes under the policy-competition regime exceed those under the policy-coordination regime. With loose federal governance, competition over low-skilled migrants, who come with no capital, induces the individual member state to raise the provision of social benefit, so as to attract more migrants when starting from the coordination equilibrium. As a result, the social benefits in all other member States must also be raised to keep these migrants at their own economy. This amounts to excessively high income redistribution – a negative fiscal externality.

JEL-codes: F15 H1 J18 (search for similar items in EconPapers)
Date: 2016-06
New Economics Papers: this item is included in nep-lab and nep-mig
Note: IFM
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Published as Assaf Razin & Efraim Sadka, 2021. "Migration and redistribution: Why the federal governance of an economic union does matter," Journal of Government and Economics, vol 1.

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