Self-Confirming Immigration Policy

We study immigration policy in a small receiving economy under self-selection of migrants.

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


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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This is a working paper, and hence it represents research in progress. This paper represents the opinions of the author, and is the product of professional research. It is not meant to represent the position or opinions of the WTO or its Members, nor the official position of any staff members. Any errors are the fault of the author. Copies of working papers can be requested from the divisional secretariat by writing to: Economic Research and Statistics Division, World Trade Organization, Rue de Lausanne 154, CH 1211 Geneva 21, Switzerland. Please request papers by number and title.

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