A political economy model of immigration quotas
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The paper examines a model in which the number of immigrants allowed into a country is the outcome of a costly political lobbying contest 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 assume that the lobbying contest is an all-pay auction (i.e., the lobbyist with the higher effort wins with certainty). Comparative statics results are derived to show how the reservation wage of immigrants, the price of the firm’s product, the size of the union and the cost of lobbying affect immigration quotas and the post-immigration wage of natives.
Keywords:All-pay auction contests immigration quotas lobbying
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