The political market for immigration restrictions: Model and test

Abstract

A two-sector model of the destination economy is developed in order to determine the distributional effects of immigration. In one sector, native and immigrant workers are substitutes in production, while in the other they are complements. The two industries are assumed to draw immigrants from the same pool, whose size is exogenous to employers and set by politicians. A political market for an endogenous immigration quota arises as a consequence of the conflicting interests of the two native worker groups, as well as those of lobbying groups organized along non-labor market lines. A reduced form expression for the equilibrium quota is derived. The size of the quota is determined by the levels of product and labor demand in the two industries, lobbying costs of native workers, the degree of substitutability or complementarity in production between native and immigrant labor, the proportions in which the immigrant workforce is divided between the two industries, the wage elasticities of demand for native and immigrant labor, the influence of groups opposed to immigration on non-economic grounds, and the size of the immigrant population in the destination country. The model is tested using annual data on employment visas issued by US authorities. It is found that political pressure for tighter immigration controls is dominant during periods of economic expansion, while technological progress, a growing immigrant community and a larger share of immigrants from Europe lead to looser immigration restrictions.