Abstract
We study immigration policy in a small receiving economy under self-selection of migrants. We show that a non-selective immigration policy choice affects and is affected by the migratory decisions of skilled and unskilled foreign workers. From this interaction multiple equilibria may arise, which are driven by the natives’ expectations on the skill composition of migrants. In particular, pessimistic (optimistic) beliefs induce a country to impose higher (lower) barriers to immigration, which worsen (improve) the skill composition of immigrants and thus confirm initial beliefs. This mechanism induces immigration policy to be self-confirming. We discuss how the adoption of a skill-selective policy affects this result.
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