Tradable Immigration Quotas

Abstract

International migration is certainly one of the most effective way to alleviate poverty at a global level. When a given host country allows more immigrants in, this creates costs and benefits for that particular country as well as a positive externality for all those who care about world poverty. This implies that the existing international migration regime is inefficient as it fails to internalize such externality. Moreover, host countries quite often restrict immigration due to its apparently unbearable social and political costs, but these costs are never measured and made comparable across countries. In this paper we first discuss theoretically how tradable immigration quotas (TIQs) can elicit information revelation about these costs and, once coupled with a matching mechanism taking migrants' preferences into account, generate substantial welfare gains. We then propose two relatively modest applications: the resettlement of international refugees, and an extension of the US diversity lottery program. Both applications are seen as allowing for considerable experimentation and as possible precursors to a full implementation of a TIQs system.