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A political economy model of immigration quotas

  • Law
  • Political Science


The paper examines a model in which the number of immigrants allowed into a country is the outcome of a costly political lobbying process between a firm and a union. The union and the firm bargain over the wage of natives after the number of immigrants that will be permitted is known. I consider two contest success functions: one in which the lobbyist with the higher effort is not necessarily the winner and another in which the lobbyist with the higher effort wins with certainty (i.e., the all-pay auction). Comparative statics results are derived to show how the reservation wage of immigrants, the size of the union, the sensitivity of the legislature to lobbying, the reservation of wage of natives, the price of the firm's product and the firm's bargaining power affect immigration quotas and the post-immigration wage of natives. I also discuss some limitations of my results.

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