Strategic Trade Policy and Migration : The Case of Different Size Countries

With an imperfect competition model of trade we analyze the impact of migration on a source and receiving migration country. We assume both countries are different in size and the flow of migrants may run in both senses. There is a two way trade in a homogenous good produced in a cournot competition framework in each country. A tariff is set previously in both countries as a strategic trade policy. Once the tariffs have been set, we analyze the impact of two-way migration on welfare in both countries. We found that countries benefit from incoming migrants and harm from leaving migrants independently of the size of the countries.