Migration and redistribution: Why the federal governance of an economic union does matter

Assaf Razin and Efraim Sadka

Journal of Government and Economics, 2021, vol. 1, issue C

Abstract: Federal governance matters. Policy coordination allows the economic union to exercise monopsony power over migrants. Therefore the migration volumes under the policycompetition 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.

Keywords: Migration; Federal government; Economic union; Skill mix; Efficiency (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jogoec:v:1:y:2021:i:c:s266731932100001x

DOI: 10.1016/j.jge.2021.100001

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