HDRO Conference Room
10 November 2008
Time: 12:30 – 2:00 p.m.
We study the effect of immigration on global welfare. The world is modeled as consisting of two regions, South and North, the former populated by low-skill workers, and the latter by both low and high-skill workers. Production in the North uses both labor inputs in a complementary way. A trade union in the North keeps the wage of low-skill workers above the Walrasian wage, generating unemployment of low-skill workers. Northern citizens fund unemployment benefits for workers through taxation. Immigration from South to North has two effects in the North: a mixed native-foreign working-class lowers union power, because of reduced solidarity among low-skill workers, and hence it lowers the mark-up on the Walrasian wage that the union is able to negotiate. It also lowers the solidarity between employed citizens and the unemployed (as the latter, now, consist in part of non-natives) and thus the unemployment benefit, set by a democratic process, falls.
We calculate the optimal levels of immigration, from the viewpoint of an observer who maximizes global welfare, according to an egalitarian and a utilitarian social welfare function. We compare these levels to the open-borders-equilibrium level. We find that the optimal level of immigration for cosmopolitan egalitarian is significantly less than the open-borders equilibrium level, while the optimal level for a global utilitarian is significantly greater than the open-borders level.
About the Speaker
John Roemer is the Elizabeth S. and A. Varick Stout Professor of Political Science and Economics at Yale University. His current work concerns distributive justice, political economy, and the relationship between them. Recent books are Democracy, education and equality (Cambridge UP, 2006), Political Competition (Harvard UP, 2001), Equality of Opportunity (Harvard UP, 1998), Theories of distributive justice (Harvard UP, 1996), and A future for socialism (Harvard UP, 1994). His collaborative book, with Woojin Lee and Karine Van der Straeten, entitled Racism, Xenophobia, and Redistribution was published in 2007 by Harvard UP and the Russell Sage Foundation. He is a fellow of the Econometric Society, the American Academy of Arts and Sciences, a corresponding fellow of the British Academy, and a past fellow of the Guggenheim and Russell Sage Foundations.
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