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

Assaf Razin*, Efraim Sadka

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

2 Scopus citations

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.

Original languageEnglish
Article number100001
JournalJournal of Government and Economics
Volume1
DOIs
StatePublished - 1 Mar 2021

Keywords

  • Economic union
  • Efficiency
  • Federal government
  • Migration
  • Skill mix

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