A political economic analysis of labor migration and income redistribution

We present a two-country political economic model of income redistribution with internationally mobile labor. Migration can be exogenous and/or endogenous (i.e., determined by labor income differentials). Political influence is determined by the size and homogeneity of the groups, where the latter can be affected by immigration. We show that immigration can increase the transfers to, and the income of, the mobile group. We also investigate the possibility of migration regulation, tax-transfer policy competition and coordination and, finally, coordination of regulation policies. It is shown that the selection of any of those regimes will depend on the particular distribution of political influence among the relevant social groups in the two countries.