Abstract
We analyze the endogenous determination of migration quota, viewing it as an outcome of a two-stage political struggle between two interest groups: those in favor and those against the proposed migration quota. First, we compare the proposed policies of the two interest groups under random behavior of the government, with and without lobbying. We examine the effect of the status quo and government intervention in the proposal of the quota on its nature, assuming that, with and without government intervention, the uncertain approval of the proposal is the outcome of a lobbying contest between the two interest groups.
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Notes
In the middle of this century, Germany was in need of workers and actively sought temporary workers especially from Turkey. Many of these “temporary” workers remained in the country after the expiry of their contract.
Source: Boeri et al. (2002)
Zimmermann (1995) shows that there has been a limited positive effect on the labor market, and thus, there are only few alternative policy options in the future.
Lobbying is an important part of the policy-making process in representative democracies (Grossman and Helpman 2001; Persson and Tabellini 2000). Several studies have addressed the issue of up to what extent lobbying affects policy. Modeling lobbying as a “menu-auction,” Grossman and Helpman (1996) studied a Downsian model of electoral competition where candidates choose policies to maximize their probability of winning the elections.
Note that in Switzerland, initiatives can be proposed by anyone (but not the government). The requirement to have a vote on them is that the proposers need 100,000 signatures of voters in order to prove that there is enough interest in the issue.
In an efficiency model where the migrants are the unemployed, for certain levels of migration, an increase in the quota increases the utility of the local population (Epstein and Hillman 2003).
This utility may not be the actual one, but the perceived utility—the utility the local population expect under a given migration quota.
We will discuss later the case where the profits of the capital owners continue to increase as a result of an increase in the number of migrants.
Although we only discuss the direct labor market effect of migration, there may be other effects such as xenophobia, desire to refrain from interaction with different cultures, the effect of the finance of public goods, as well as welfare and distributional effects that adversely affect the local population (for a more detailed analysis, see Sect. 1).
These type of results can also be derived from a Heckscher–Ohlin international-trade model allowing international factor mobility (see Mundell 1957).
In a similar way, in the contest over monopoly regulation studied in Baik (1999), Ellingsen (1991), and Schmidt (1992), the monopoly firm is assumed to defend the status quo, its profit-maximizing price (against any price regulation), while the consumers challenge the status quo lobbying for the competitive price (a tight price cap).
Xw and xk are total lobbying efforts. An implicit assumption is thus made that the interest groups are able to fully overcome the free-riding effects.
Such symmetry implies that the two players share an equal ability to convert effort into probability of winning the contest.
In contrast to the recent literature on public policy determination in representative democracies (Grossman and Helpman 2001; Persson and Tabellini 2000), in our two-stage reduced-form public policy contest, the effect of the often elaborate relationship between the public well-being and the probability of reelection on the behavior of the bureaucrat is disregarded.
We assume that the second-order condition holds.
Note that the two type of situations, the one where the interest groups determine the proposed policies and the one where the bureaucrat determines the proposed policy, can be combined in the following way: define Prk 1=βPrk and Prw 1=βPrw, where 0<β≤1. Then Prk+Prw<1, which implies that 1−β≥0 is the probability that neither of the proposals by the lobbyists will be chosen. In other words, 1−β is the probability that the status quo will be chosen by the bureaucrat. The bureaucrat will choose β to maximize his payoff. If β=1, the bureaucrat will chose the status quo. If the contest success function is \(\Pr _{i} = \frac{{x_{i} }} {{x_{j} + x_{i} }}\) (Tullock 1980), then the total expenditure of the groups is a linear function of β. Therefore, if the bureaucrat’s objective is to maximize the resources invested in the contest, then he/she will choose a corner solution.
We thank an anonymous referee for pointing out this issue.
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Acknowledgements
We are grateful to Ira Gang and to two anonymous referees for helpful and constructive comments.
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Appendix
Appendix
Using Eq. 6 with Q i =Q, we obtain that the Nash equilibrium efforts satisfy the following conditions:
.
Rewriting Eq. 20 together with the first-order conditions, we obtain that:
where \(B = Q\,n_{i} n_{j} {\left( {\frac{{\partial ^{2} \Pr _{j} }} {{\partial x_{j} ^{2} }}\frac{{\partial ^{2} \Pr _{i} }} {{\partial x_{i} ^{2} }} - \frac{{\partial ^{2} \Pr _{i} }} {{\partial x_{i} \partial x_{j} }}\frac{{\partial ^{2} \Pr _{j} }} {{\partial x_{i} \partial x_{j} }}} \right)} > 0\) and \(\eta _{j} = \frac{{\partial n_{i} }} {{\partial Q}}\frac{Q} {{n_{i} }}\). All values are computed at the Nash equilibrium. The effect of a change in the quota on the total effort invested in the contest by the capital owners and the workers, X*, is given by:
Hence, if Q k*>Q>Q w* then
and if Q k*<Q, then \(\frac{{\partial X^{ + } }}{{\partial Q}}\frac{ > }{ < }0 \Leftrightarrow \raise0.7ex\hbox{${\frac{{\partial ^{2} \Pr _{{\text{k}}} }}{{\partial x_{{\text{k}}} \partial x_{{\text{w}}} }}}$} \!\mathord{\left/ {\vphantom {{\frac{{\partial ^{2} \Pr _{{\text{k}}} }}{{\partial x_{{\text{k}}} \partial x_{{\text{w}}} }}} { - \frac{{\partial ^{2} \Pr _{{\text{k}}} }}{{\partial x_{{\text{k}}} ^{2} }}}}}\right.\kern-\nulldelimiterspace}\!\lower0.7ex\hbox{${ - \frac{{\partial ^{2} \Pr _{{\text{k}}} }}{{\partial x_{{\text{k}}} ^{2} }}}$}\frac{ > }{ < } - 1\).
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Epstein, G.S., Nitzan, S. The struggle over migration policy. J Popul Econ 19, 703–723 (2006). https://doi.org/10.1007/s00148-005-0021-3
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DOI: https://doi.org/10.1007/s00148-005-0021-3