Nash equilibrium tariffs and illegal immigration: an analysis of preferential trade liberalization

Subhayu Bandyopadhyay and Ryo Takashima ()

No 2007-021, Working Papers from Federal Reserve Bank of St. Louis

Abstract: We use a version of the small-union Meade model to consider the effects of interdependent import tariffs in the presence illegal immigration. First, we analyze the condition under which illegal immigration is likely to increase (or decrease) in response to reciprocal trade liberalization between the source and host nations (of illegal immigration). Next we describe the Nash equilibrium in tariffs between these nations and discus how a liberalization of tariffs starting from this Nash equilibrium is likely to affect their utility. Finally, we consider the effect of the host nation's liberalization of the import tariff (imposed on its imports from a third nation). We show that strategic considerations regarding the effect of this tariff liberalization on the Nash equilibrium tariffs can modify the traditional (trade creating/diverting) gains from such liberalization.

Keywords: Trade; Immigrants (search for similar items in EconPapers)
Date: 2007
New Economics Papers: this item is included in nep-int and nep-mig
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