## Abstract

The Common European Asylum System calls for increased coordination of the European Union (EU) countries’ policies towards asylum seekers and refugees. In this paper, we provide a formal analysis of the effects of coordination, explicitly modelling the democratic process through which policy is determined. In a symmetric, two-country citizen-candidate setup, in which accepting asylum seekers in one country generates a cross-border externality in the other, we show that coordination is desirable. Internalizing the externality leads to a welfare improvement over the non-cooperative outcome. However, contrary to suggestions by many observers, we show that allowing for cross-country transfers in the cooperative outcome leads to a welfare inferior outcome because the possibility of compensation exacerbates strategic delegation effects.

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## Notes

General Declaration on Articles 13 to 19.

See Luedtke (2005).

“Switzerland and Austria have accused Italy of turning a blind eye to would-be refugees heading north.”

*The Economist*, September 6, 2001.Emphasis added by the authors.

The citizen-candidate framework we are using has been introduced by Besley and Coate (1997) and Osborne and Slivinski (1996). The concept of strategic delegation has been applied in different contexts: Besley and Coate (2003) use it to analyze the provision of local public goods, Willmann (2004) employs it to endogenize trade policy, Lorz and Willmann (2005) explain the degree of regionalism in this way, etc.

For more details on the construction of the figures, we refer the reader to the Appendix of Hatton (2004).

It is worth emphasizing that the specific functional forms are chosen solely to guarantee a closed-form solution. The crucial features of this setup are the convex cost that gives rise to a concave objective function and the positive

*net*spill-over from admitting asylum seekers. A similar functional form is used by Segendorff (1998).Conceptionally, we can distinguish up-front processing costs and the ongoing cost burden. While our model allows for both, the inclusion of spill-overs is relevant mainly for the latter.

Notice that in our model, we do not explicitly consider the dynamic adjustments involved in the ‘relocation’ of migrants across countries. This is realistic as long as the relocation takes place quickly. Alternatively, as suggested by one referee, we could think of \(m_i\) as representing the stock of refugees, and the costs and utilities should then be interpreted as present values.

Note that the welfare of immigrants enters aggregate welfare in each country only indirectly through the warm glow effect.

Recall that we assume \(1/2<\lambda<1\).

Note that in the absence of cost spill-overs (\(\lambda=1\)) strategic delegation would disappear in the noncooperative game. This is not true in the coordination case because their strategic delegation is undertaken for different reasons, as will become clear in the next section.

The outside utility, thus, takes the form \(U_i(\hat{\alpha}_i,m^N)=2\left[1+\hat{\alpha}_i\right]m_i^{N}(\hat{\alpha}^N)+\ln(1- m_i^{N}(\hat{\alpha}^N))\), where \(m_i^N(\hat{\alpha}^N)\) is determined by the equilibrium without coordination derived in the previous section. Note that this implies that the representatives who bargain are not necessarily the same as those who set the immigration level noncooperatively. We make this assumption to keep the model tractable.

Note that this argument would hold even if \(\lambda=1\), and therefore, there were no strategic delegation in the non-cooperative game the of previous section.

This result is reminiscent of Wilson (1990) who shows that the availability of a more efficient policy instrument can lead to a less efficient equilibrium because the efficient instrument is used more extensively.

One may wonder why the two countries would consider side payments at all, as these turn out to lead to a welfare inferior outcome. We are implicitly assuming that politicians cannot commit to not use such payments. This assumption is supported by the fact that the use of side payments is a prominent feature of the current political debate.

This is due to our simplifying assumption of \(\lambda=1\), not to the asymmetry.

## References

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## Acknowledgements

We are grateful to Gil Epstein who provided the impetus for this research, to two anonymous referees for insightful comments and to conference participants at the Midwest International Economics Spring 2005 meeting for helpful discussions. The usual caveat applies: all errors are ours.

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## Appendix

### Appendix

### Symmetric case

This appendix derives \(dm_i^B/d\hat{\alpha}_i\) and \(dm_{-i}^B/d\hat{\alpha}_i\) for the bargaining equilibrium without side payments. The first-order condition for \(m_i^B\) as given by Eq. 14 is \(N_{m_i}=0\). The first-order condition for \(m_{-i}^B\) is \(N_{m_{-i}}=0\). By totally differentiating these equations, we obtain

Departing from the symmetric equilibrium (\(\hat{\alpha}_i=\hat{\alpha}_{-i}\) and \(s_i=s_{-i}\)), the respective terms in Eqs. 42 and 43 can be derived as

Inserting these equations into Eqs. 42 and 43 and rearranging yields

### Asymmetric case

As in the symmetric case, the equations determining the marginal influence of \(\hat{\alpha}_i\) on the immigration levels can be derived from the first-order conditions and are identical to Eqs. 42 and 43 above,with \(N_{m_i}=0\) given by Eq. 34. From Eq. 34 the following equations can be derived:

Inserting these equations, employing Eq. 34, and rearranging yields Eqs. 35 and 36, with \(\mid H\mid \equiv N_{m_im_i}N_{m_{-i}m_{-i}}-N_{m_i m_{-i}}N_{m_{-i} m_i}>0\).

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Facchini, G., Lorz, O. & Willmann, G. Asylum seekers in Europe: the warm glow of a hot potato.
*J Popul Econ* **19**, 411–430 (2006). https://doi.org/10.1007/s00148-005-0059-2

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DOI: https://doi.org/10.1007/s00148-005-0059-2

### Keywords

- Political economy
- Asylum policy
- Migration

### JEL Classification

- J61
- H77
- F22