NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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How Migration Can Change Income Inequality?

Assaf Razin, Efraim Sadka

NBER Working Paper No. 22191
Issued in April 2016, Revised in October 2016
NBER Program(s):International Finance and Macroeconomics

Motivated by the unique experience of Israel of a supply-side shock of skilled migration, and the concurrent rise in disposable income inequality, this paper develops a model which can explain the mechanism through which a supply-side shock of skilled migration can reshape the political-economy balance and the redistributive policies. First, it depresses the incentives for unskilled migrants to flow in, though they are still free to do so. Second, tax-transfer system becomes less progressive. Nonetheless, the unskilled native-born may well become better-off, even though they lose their political clout.

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Document Object Identifier (DOI): 10.3386/w22191

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