Anti-immigration policy in developed countries: Welfare and distributional implications for developing economies

Abstract

We develop a 3 × 4 full-employment small open economy model for examining the consequences of anti-immigration policy against skilled labor adopted in the developed country on both national income and wage inequality in a source developing economy, keeping aside the aspect of immigration of unskilled labor. We find that both social welfare and wage inequality are likely to deteriorate when, ceteris paribus, the degree of distortion in the unskilled labor market is sufficiently high. In addition, through quantitative analysis we have recommended a couple of policies that are likely to lessen the adverse outcomes on both the economic indicators.