Insights on Immigration and Development
Working Papers
Working paper # 2

Temporary Migration and the Size of Government

By Francesc Ortega
(May 2006)

The US is currently undertaking a comprehensive reform of its immigration policy and, most likely, the new system will be based on temporary work permits. The main unresolved issue is whether to offer a track to citizenship to future immigrants and to the large number of undocumented foreigners already in the country. This paper compares the dynamics of redistributive programs under two alternative scenarios. In the first, immigrants stay permanently in the country and gain the right to vote. In the second scenario, immigrants only receive temporary work permits, and hence only affect natives through their labor market outcomes. The main finding is that a shift toward a system based on temporary migration is likely to lead to a reduction in the size of redistributive programs. Specially, I build a dynamic political economy model where, in each period, voters choose an immigration policy and the size of an income redistribution program by majority vote. Over time, the income distribution varies because of intergenerational skill mobility and immigration. I first show that when immigrants gain the right to vote there exist equilibria where income redistribution is sustained indefinitely. In these equilibria, immigration policy is used strategically: the unskilled majority admits some of unskilled immigrants. Next I show that a shift toward temporary migration leads to abandoning redistributive programs. Finally, I argue that granting citizenship to the large number of undocumented workers currently in the US may significantly increase the current support for redistributive policies for a few decades but will not have permanent effects.

JEL Classification: F22, I2, J62
Keywords: Migration; Citizenship; Redistributive policies; Political economy


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