Fiscal Policy and Optimal Immigration Quotas

Abstract

We consider a destination country with an aversion toward legal and illegal migration. Candidate migrants differ in terms of skills level and the legal migrants pay income taxes. There is a positive probability to become clandestine once a candidate migrant is rejected. We show that the government will give the priority to candidate migrants with high skills. We derive the optimal quotas of the legal immigration and show that the number of legal migrants increases as soon as the probability of entering into the destination country illegally becomes larger.