Managing Migration through Conflicting Policies: an Option-theory Perspective

Michele Moretto and Sergio Vergalli

No 2731, CESifo Working Paper Series from CESifo

Abstract: Recent European legislation on immigration has revealed a particular paradox on migration policies. On the one hand, the trend of recent legislation points to the increasing closure of frontiers (OECD 1999, 2001,2004), trying to limit the immigrants’ stock. On the other hand, there is an increase in regularization, i.e., European policies are becoming less tight. Our aim here is to develop a theoretical model that tries to explain if it is better for the government to tighten or relax limits for immigrants in order to control migration inflows better. To this end, we use a real option approach to migration choice that assumes that the decision to migrate can be described as an irreversible investment decision. In our model the government has in mind a specific upper bound on immigrants, and the policies adopted (admission requirements or regularizations) are signals for each potential migrant that reveal information about this limit. Our results show that promoting uncertainty over this migration upper bound may improve the government’s control on migration inflows (quotas). This could explain that the paradox of counterbalancing policies is not an odd evidence. In particular, we show that if the government controls the information related to the immigration stock it could delay the mass entry of immigrants, maintaining the required stock in the long run and controlling the flows in the short-run.

Keywords: immigration; real option (search for similar items in EconPapers)
JEL-codes: F22 J15 J61 O15 R23 (search for similar items in EconPapers)
Date: 2009
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Journal Article: MANAGING MIGRATION THROUGH CONFLICTING POLICIES: AN OPTION‐THEORY PERSPECTIVE (2010)
Working Paper: Managing Migration through Conflicting Policies: an Option-theory Perspective (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_2731

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