Decentralized Income Redistribution and Immigration

by

Dietmar Wellisch
Technische Universtat Dresden
 
and
 
David E. Wildasin
Department of  Economics
Vanderbilt University
 

Abstract

We analyze the welfare and other effects of immigration on a system of jurisdictions with a common labor market, mobile capital, and redistributive tax/transfer policies. Comparative-statics analysis of a model of Nash non-cooperative equilibria in tax/transfer policies shows that the welfare effect of immigration depends on whether immigrants are net fiscal contributors or burdens. Any one jurisdiction’s redistribution and immigration policies generate fiscal externalities for others in the system, which a central government can internalize by appropriate taxes and subsidies.

David E. Wildasin / dew@davidwildasin.us


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