We show that a non-discriminatory 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 welfare effects of immigration. In particular, pessimistic (optimistic) beliefs induce a country to impose higher (lower) barriers to immigration, which crowd out (crowd in) skilled migrants and thus confirm initial beliefs. This self-fulfilling mechanism sustains the endogenous formation of an anti or pro-immigration prejudice. We discuss how the adoption of a skill-selective policy affects this result.

No: ERSD-2012-06

Authors:

Paolo E. Giordani — LUISS “Guido Carli” University and Michele Ruta — World Trade Organization

Manuscript date: March 2012

Key Words:

Immigration policy, skilled/unskilled workers, small economy, multiple equilibria

JEL classification numbers:

F22, J24, J61

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