Political Economy and Migration Policy: Gary P. Freeman and Alan E. Kessler

Journal of Ethnic and Migration Studies
Vol. 34, No. 4, May 2008, pp. 655678
Political Economy and Migration Policy

Gary P. Freeman and Alan E. Kessler
The disciplines of economics and political science have a good deal to offer each other in
the study of migration policy, but economists have until recently mostly ignored the ways
in which politics constrain migration markets, and political scientists*although giving
considerable credence to economic aspects of migration*have not always pursued these
matters systematically. We consider economic ideas drawn from theories of labour
markets, international trade and public finance and link them to political analyses
stressing the role of states, institutions and interest groups. A review of literature
incorporating these perspectives suggests the promise of a political economy of migration,
but also indicates the considerable work that remains.
Keywords: Migration Policy; Labour Migration; Political Economy
Introduction
Economists studying migration have slighted the investigation of migration policies,
the role of states in formulating those policies, and that of politics in shaping policy
outcomes (Borjas 1994; Chang 2000). Political science, for its part, has deployed an
eclectic assortment of theoretical and analytical tools, as many drawn from cognate
disciplines as from political science itself. Cornelius and Rosenblum (2005) argue that
political scientists have tended to accept that migration has a strong, if not dominant,
economic dimension. Nevertheless, political science has not systematically integrated
economic and political concepts concerning immigration.
We argue that both economics and political science would be well-served to join
forces more self-consciously in the study of migration politics. The strengths of each
discipline complement those of the other and make good some of their deficiencies.
The discipline of economics provides some of the most promising and sophisticated
theories, concepts and empirical methods for analysing migration politics. Although
neoclassical economics is criticised for taking preferences as given (especially as
Gary P. Freeman and Alan E. Kessler are respectively Professor and Chair of the Government Department, and
Lecturer in Government, at the University of Texas at Austin. Correspondence to: Prof. G.P. Freeman/Dr A.E.
Kessler, Department of Government, University of Texas at Austin, 1 University Station, A1800 Austin, Texas,
USA. E-mail: [email protected]; [email protected]
ISSN 1369-183X print/ISSN 1469-9451 online/08/040655-24 # 2008 Taylor & Francis

DOI: 10.1080/13691830801961670
656 G.P. Freeman & A.E. Kessler
applied in rational choice perspectives), economic theory and analysis may be

employed to give useful, if partial, answers to the question as to where preferences
come from. We do not believe that immigration preferences always reflect underlying
material interests, but we argue that the material stakes of migration are critical
inputs into the migration policy process that must be taken into account, and that
economic models produce testable hypotheses as to their identity. Political science, on
the other hand, specialises in analysing the institutions and processes that frame,
shape, transform, distort and channel economic and non-economic preferences into
policy agendas and outcomes, but has more difficulty explaining the origins of the
preferences of actors. Economic models of migration devoid of political dimensions
and political models that fail to credit the economic underpinnings of the migration
process risk being naı̈ve and incomplete.1
Economics and political science can be usefully combined to create political
economy approaches well-suited to address particular questions about migration
policy. We discuss three leading approaches from political science in the migration
policy literature: statist, institutionalist, and interest-group. We divide economic
perspectives on migration into two broad categories: the study of wage and income
effects of migration carried out by labour market and trade economists, and the study
of the fiscal or transfer effects of migration derived from the field of public finance.
These five perspectives from the two disciplines, when combined, yield six analytical
perspectives, as depicted in Table 1.
Part 1 of this paper reviews political science perspectives on migration policy,
focusing on states, institutions and interest groups. Part 2 looks at the economics of
migration policy, laying out theoretical models that investigate the wage, income and
fiscal effects of migration. Part 3 seeks to demonstrate the promise of combining
ideas drawn from the two disciplines by exploring insights to be gained from statist,
institutionalist and interest-group approaches that investigate hypotheses derived
from economic models of wage, income and fiscal effects of migration.
Political Science and Migration Policy: States, Institutions and Interest Groups
The contemporary literature on the politics of migration policy is scarcely 30 years
old, but it has produced a broad array of interpretive schemes. A number of reviews
have tried to make sense of the field by categorising research according to its (often
unselfconscious) analytical or theoretical points of view. A partial accounting of
Table 1. Political economy approaches to migration policy
Political science
Statist Institutionalist Interest group
Economics
Wage and income effects 1 2 3
Fiscal effects 4 5 6
Journal of Ethnic and Migration Studies 657
recent reviews yields interests, the liberal state and globalisation (Hollifield 2000);
Marxism, realism, liberalism, national identity, domestic politics and institutionalism
(Meyers 2000); interests, rights and states (Freeman and Birrell 2001); post-industrial
change, spatial (territorial) models and trade theory (Freeman 2002); globalisation,
embedded realism and path dependence (Hansen 2002), domestic interest groups,
political institutions and international factors (Cornelius and Rosenblum 2005); and
power resources and constellation theories, state-centric and institutional theories,
cost-benefit or economic theories, and cultural and racial/racialisation theories
(Janoski and Wang 2006). Making a necessarily arbitrary choice, we treat the political
science literature here under the three headings of states, institutions and interest
groups.
The state was a central concept of traditional political science, but it nearly
disappeared from view in the wake of the postwar behavioural revolution. The
concept enjoyed something of a comeback in the 1970s with the relatively brief
popularity of neo-Marxist theories and the more lasting resurgence of interest in
institutions. States have always been a major component of realist international
relations theory, where they are typically treated as unitary actors seeking to
maximise the ‘national interest’. In some models, the state is thought to arbitrate
among competing domestic interests to determine policy. Debates on how and why
this arbitration takes place reflected instrumentalist versus structural theories of the
state and its relation to capital (Evans et al. 1985; Miliband 1987; Poulantzas 1982).
American political scientists, perhaps reflecting their experience with a weak and
fragmented liberal state, were less drawn to state theory than their counterparts in
other regions of the world (Seidelman 1985).
The combination of neglect of migration by political scientists with the fascination
of economists for some version of push/pull theory in which individual migration
decisions were a result of calculations of utility focused largely on employment
markets and relative wages meant that the fundamental role of states in stimulating
and organising migration flows was slow to be recognised. Indeed, no one has yet
produced a full-scale effort to apply a theory of the state to migration politics and
policy. Zolberg et al. (1989) were among the first to trace the sources of migration to
the activities of states. Zolberg (1999) produced an articulate case for treating state
regulations and policies as central to the character of migrations world-wide. Still, the
motives that might underlie state actions remain poorly specified. Hollifield (2004)
argues that migration policies of liberal states can be interpreted as steering a path
between the realisation of economic gains (which requires careful, if not always
restrictive, management) and respect for liberal values (which tends to erode such
policies). According to Weiner (1993, 2001) and Rudolph (2003), states approach the
prospect of migration from the point of view of its potential effects on national
security, variously conceived as economic viability, political cohesion, and defence of
the national territory. Hammar (1985), Brochmann and Hammar (1999), and Massey
(1999) view migration policies as problems of management and regulation, directed
at both controls over the character of flows and the interactions between migrants
and natives.
Institutionalist accounts disaggregate the state, focusing on the distinct roles played
by bureaucracies, political parties, electoral arrangements, executive/legislative
relationships, etc. in the policy-making process. Institutions have been variously
defined in straightforwardly empirical terms*parliament, president, party, electoral
system*or more loosely to include rules and norms that are not necessarily or
primarily embodied in formal organisations. Institutionalists have been the chief
advocates of the notion of path dependence and the fuzzy and, therefore, indisputable
claim that ‘history matters’. The gist of their interpretation is that the determinants of
policy are complex, difficult to pin down, and certainly not reducible to preferences
of individual actors or group-level demands. Institutional inertia, policy legacies and
‘contingency’ must be taken into account.
Examples of institutionalist accounts of immigration policy abound. Inter-agency
conflict ‘inside the state’ is at the heart of some accounts (Calavita 1992; Fitzgerald
1996; Rosenblum 2004). Political parties have been central to many immigration
studies. Scholars have investigated the immigration preferences of mainstream parties
(Messina 1989; Money 1999; Tichenor 2002), the sources of support for right-wing
populist parties (Betz 1994; Betz and Immerfall 1998; Schain et al. 2002), and the
effect of electoral arrangements on the success of anti-immigration parties (Givens
2005). Soysal (1994) advances perhaps the best-known exposition of the impact of
the new international regime of values and norms transcending traditional notions of
national citizenship (cf. Gurowitz 1999; Jacobson 1996). Hansen (2000, 2002) shows
that path dependence can be helpfully applied to otherwise puzzling immigration
policy conundrums. Efforts to explain the variation across states in the shape and
temperature of migration politics often focus on political opportunity structures that
affect the capacities and incentives of various groups to organise and give voice to
their preferences (Ireland 1994; Koopmans and Statham 2000; Ögelman 2003).
Interest-group arguments date from the seminal works of such luminaries as
Arthur F. Bentley (1908), V.O. Key, Jr. (1942) and David B. Truman (1951). Group
models of politics contest the idea that the individual can be the principal unit of
analysis and instead search for propositions about how and when individuals
coordinate their activities and engage in collective behaviour (Olson 1971). Work in
this vein commonly attempts to link policy demands to concrete (or expected) gains
and losses of identifiable sub-groups of the electorate and to the bargains and
compromises they produce in pluralistic political systems. Interest-group approaches
have focused on a broad array of groups positioned for or against immigration
(Freeman 1995; Gimpel and Edwards 1999; Haus 1995; Joppke 1998; Watts 2001).
For all the insights research in political science yields, a singular failing is that it is
unable to provide a convincing theoretical account of the origins of individual
preferences on immigration or the motivations of institutions with respect to the
issue. Statist analysis, for example, presumes that policy is designed to achieve the
national interest, but provides few sure guidelines for determining what the national
interest is in immigration policy. Should it be directed at defending national

sovereignty and the sanctity of borders? In order to achieve these ends should states
pursue open or restrictive, selective or permissive immigration policies? Should they
mount policies designed to reap maximum economic benefit or trim policies in
accord with popular prejudices or with an eye to social order? Hypotheses about state
motivations require heroic assumptions that lack firm theoretical footing. Moreover,
a statist model confronts the problem of explaining why liberal democratic receiving
states adopt widely disparate immigration and citizenship policies. Recognising this
dilemma, scholars tend to differentiate across state structures, but this simply drives
the analytical challenge back a step since it is then necessary to account for the
erection of different types of state institutions, an accounting that requires, in order
to avoid tautology, resort to non-statist theoretical approaches (Janoski and Wang
2006: 636).
Similar problems plague institutionalist accounts. A plausible story can be woven,
for example, that immigration policy emerges out of conflicts between central
executives concerned about diplomatic and security issues and specific ministries
responsible for labour markets, industry, or immigration and citizenship. These
stories are, however, rooted in inferences about what institutions want based on
empirical observations of their behaviour rather than theoretically derived proposi-
tions. A recent review demonstrates the absence of systematic knowledge about the
institutional arrangements developed in various receiving states to manage immigra-
tion and integration programmes. There is little empirical evidence to support
generalisations about the motivations of different bureaucratic bodies and no
consensus as to whether diverse institutional configurations yield diverse policy
outcomes (Van Selm 2005).
Interest-group accounts appear on the surface to surmount this problem, but are in
fact seriously challenged by it. Interest groups usually come with handy labels
identifying them as labour unions, employer federations and the like, that appear to
provide a direct indicator of the ‘interest’ being pursued. In practice, such studies are
incomplete until they generate theoretical explanations for the particular issue
positions taken by these groups and the motivations that impel them to organise.
Economics and Migration Policy: Wage, Income and Fiscal Effects

The literature on the economics of migration is situated in the practice of a more
theoretically and methodologically integrated social science discipline than political
science. By far the majority of work on migration coming out of economics addresses
its role in labour markets (Bauer and Zimmermann 2002; Borjas 1994; Smith and
Edmonston 1997). We refer to these efforts as production function or aggregate
output models. Most migration is thought to be undertaken for purposes of work.
Migrants are therefore conceived as labour power, or embodied human capital, and
their introduction into national or local labour markets is presumed to increase an
economy’s productive resources and capabilities. In the abstract, nations in a position
to attract migrants should encourage immigration and sending states should

discourage it. The logic of efficiency drives the unwavering conviction of most
economists that immigration produces net gains up until the point at which the
marginal productivity of labour is equalised globally (Simon 1989).
The standard caveat is, of course, that aggregate gains for receiving states involve
distributional trade-offs (Straubhaar 1992). Borjas (1995) illustrates these trade-offs
starkly in a stylised model of the national labour market, in which output is a
function of the efficient allocation of productive inputs, capital and labour. An influx
of immigrants increases the economy’s labour supply and productive resources,
contributing to a rise in national income, or an ‘immigration surplus’. At the same
time, however, immigration entails a redistribution of income away from domestic
labourers to migrants and capital owners, yielding potential avenues for political
conflict among diverse economic (and non-economic) interests.2 A question that
arises from the point of view of designing immigration policy, however, is whether
those who gain from immigration (business, consumers, migrants, and the like) can
(and are willing to) compensate those who lose in order to produce a net social gain.
Another issue is the non-economic consequences of migration (ethnic conflict,
political discontent, etc.). Both of these questions require the introduction of political
variables into the analysis that potentially constrain the ability of decision-makers to
direct policy toward any particular outcome.
A similar tension between efficiency and distribution characterises work on
immigration in international economics. The two most widely employed models of
international trade, the Heckscher-Ohlin (H-O) and specific-factors models, give
competing insights into the economic impact of immigration (cf. Grether et al. 2001;
Venables 1999). Moving beyond a simple characterisation of a closed, national labour
market, trade economists assess how immigration affects returns to capital owners
and labourers in an economy open to international goods and/or factor mobility
(Wong 1995). In the standard two-factor, two-good H-O model, in which countries
endowed with different levels of resources exchange goods but factors are immobile,
trade substitutes for migration (Mundell 1957; but see Markusen 1983). When
countries trade, the relative prices of goods converge causing, in turn, a tendency
toward factor price equalisation (as countries exchange factors of production,
typically capital or labour, indirectly via trade). Countries rich in labour thus export
labour-intensive goods while countries rich in capital export goods embodying more
capital than labour, and the convergence in relative prices of labour and capital erodes
incentives for international migration in equilibrium (for a technical exposition see
Krugman and Obstfeld 2002: 6691; Leamer 1984).3 Where labour migration does
occur, in the context of the Heckscher-Ohlin model, analysts expect immigration to
exercise little long-run impact on national labour markets as new workers are instead
absorbed into the production process (Hanson and Slaughter 2002). In this model, as
Trefler (1998: 213) notes, immigration does not affect the economic welfare of natives
or immigrants and the immigration surplus is zero.4
In other trade models, immigration contributes to aggregate national income but

exercises downward pressure on wages. In two-factor models, where homogeneous
capital and labour are inputs in production, an increase in the labour supply reduces
wages as immigrants compete with, or substitute for, domestic workers in the labour
market. With the introduction of additional factors, however, immigration may raise
the marginal productivity of labour and increase incomes of non-competing workers.
The specific-factors model (Jones 1971; Samuelson 1971) offers the most straightfor-
ward context for illustrating potential gains to complementary domestic workers. In
the model, three factors of production, typically land, labour and capital, are
combined to produce two goods, food and manufactures. Land and capital are tied
to, or are specific to, the production of one good*food and manufactures
respectively. Labour, on the other hand, can be used in the production of either
good and is therefore considered mobile (see Krugman and Obstfeld 2002: 3765). If
immigrants are concentrated primarily in agriculture, capital is specific to
manufacturing, and domestic workers are free to move between sectors, then an
influx of immigrants tends to lower wages in agriculture but raise returns to mobile
labour. If capital is mobile and land and labour are tied to specific sectors, however,
an influx of immigration is likely to benefit owners of capital at the expense of
holders of land and labour (see Venables 1999). In the general three-factors, two-
goods model there are two ‘extreme’ factors and one ‘middle’ factor. Ruffin (1981)
shows that an increase in immigration decreases factor returns for extreme factors
while benefiting the middle factor, with the designation of middle and extreme
determined by characteristics of the national economy.5
In both production function and trade-based models, the impact of immigration
on wages drives political-economic responses in a predictable way. Yet the economic
determinants of national policy are also influenced by the fiscal costs and benefits of
immigration. Questions of public finance, or the net contribution of immigration to
government revenue, point to an additional economic basis for support for and
opposition to migration.6 If immigrants pay less in taxes than they receive in
government benefits, opposition to immigration may stem from concern over fiscal
rather than (or in addition to) wage effects. In this case, the range of political and
economic interests engaged in immigration policy is broader than models from
labour or trade economics suggest, and politics necessarily more complex. Taxpayers,
for example, may resent costs attributed to immigrants*real or perceived*for their
use of local public goods such as education, health-care or income support, regardless
of the impact of immigration on wages. Furthermore, because immigration is
typically geographically concentrated, residents and elected officials in localities that
bear a disproportionate share of such costs have greater incentives to oppose
immigration, while those in other localities clearly have less.7 State and local
representatives, as well as local interest groups, thus have fiscal incentives to court or
curb immigration that may conflict with those of the national government, as tension
between high immigrant states and the federal government in the United States
attests (Zimmermann and Tumlin 1999).
Economic approaches to immigration thus offer diverse accounts of the costs and
benefits of immigration, leaving analysts to select the model best suited to the
political context in question. Because low-skilled workers or those with low education
are likely to bear the brunt of labour market competition, redistribution of income is
the key mechanism underlying potential political conflict. Where the impact of
immigration on local labour markets appears ‘large’, an increase in the labour supply
accompanying an influx of immigrants is likely to exercise downward pressure on
wages. In such a case, class conflict, or political cleavages pitting businesses and
immigrants against labour, is likely to result. If the labour market impact of
immigration is ‘small’ or social programmes mitigate adverse effects of competition,
on the other hand, non-economic concerns are likely to dominate the political
debate. How one defines large and small is, of course, crucial to characterising politics
and is subject to manipulation by organised political constituencies (lobby groups,
media outlets, issue entrepreneurs, etc.). This is critical for understanding the
interaction between economic and political approaches to immigration. We take up
this argument again below.
If the labour market effects of immigration are of less immediate concern and the
political debate instead is cast in terms of costs and benefits to taxpayers, the cast of
characters engaged in policy debate is likely to change. Fiscal costs and benefits from
immigration cut across class or sector-based lines, pitting taxpayers, localities, and
diverse lobby and special interest groups against one another in the struggle over
policy. Low-skilled workers adversely affected by immigration are, as in the previous
case, likely to push for local or national redress, particularly in high-immigration
localities. Where low-skilled workers are of similar ethnic or cultural background to
immigrants, one may expect that solidarity rather than economic self-interest
dampens incentives to oppose immigration, though ultimately the question remains
an empirical one. Federalism, as in the US and German cases, adds additional
complexity to this discussion, with sub-national governments looking to the central
government for assistance in dealing with the consequences of policies that are a
‘national’ responsibility.
Many of the observations and hypotheses discussed in this section are summarised
in Table 2. In terms of standard production function or aggregate output accounts
summarised across the first row of the table, the expected economic effects of
immigration yield a familiar class-oriented account of potential political cleavages.
Businesses benefiting from an increase in the supply of labour gain, while labourers
competing with new immigrants face a more competitive labour market. Trade
models, depicted in the second and third rows, offer a distinct starting-point for
political economic analysis. In the H-O context, immigrants enter into the
production process in a manner consistent with their skill-set, exercising little
impact on the labour market and, hence, occasioning little reason for political action.
The specific-factors model better approximates potential economic incentives that
might generate political tensions in the short run (during the process of economic
adjustment). Immigration is expected to depress wages of citizens and residents of
Table 2. Economic models of migration effects and projected political consequences
Model Relevant actors Economic effect Politics
Production/ Capital, labour Profits increase, wages Class cleavages

output model decrease Capital , labour
H-O model* 2 factors (capital, No wage effect (in long Model predicts none
labour) or skilled, run), change in but expect short-run
un-skilled labour production opposition from workers
bearing cost of adjustment
Specific- 3 factors (capital, land, Wages decrease; profits Sectoral cleavages

factors model labour) or skilled increase contingent Mobile factor , specific
labour, unskilled labour, on assumptions . . . factors
capital
Fiscal models Young, middle-aged, Greater participation in Class cleavages (?)

elderly; federal vs. state? welfare programmes. Low-skilled workers
In US, state-level costs of Skilled workers / (?)
education, health care; In US high immigrant
federal govt. benefits from states , federal
tax revenues government
*Heckscher-Ohlin model.
wins, loses.
similar skill, but augment incomes of other socio-economic actors. A rich set of
coalitional possibilities thus arises, with patterns of support for and opposition to
immigration attuned to the mobility and sectoral affiliation of organised groups.
Fiscal models, highlighted in the bottom row, identify an even broader array of
potential economic effects and offer a richer but complex set of political patterns.
One might expect class tensions in light of perceived competition for public goods
but matters of geographic concentration or regional or local politics (particularly in
federal systems) complicate straightforward hypotheses. With respect to the
beneficiaries of tax-funded programmes versus those who are essentially tax-payers,
the model predicts that beneficiaries favour a status quo in which they gain but are
likely to face high collective action costs*a status quo bias effect. Because the
situation is symmetrical, generally, welfare effects are opposite.
Economic models produce powerful hypotheses about the economic effects of
various types of migration and, therefore, the stakes involved for migrants and
natives. If actors respond to the economic incentives produced by migration, the
models should be predictive of the political conflicts and coalitions generated by
migration. One obstacle to testing these economic hypotheses is that the models from
which they are derived are highly abstract, general and simplified. In the real world,
migration flows are more numerous and complex than the models can accommodate.
Efforts to test trade models with historical data drawn from specific countries find
considerable support, but confront important instances when economic predictions
are not confirmed (Kessler 1999). Addressing the interaction of economic and
non-economic considerations is also critical. Identifying the relative contribution of

material and non-material determinants of policy remains a necessary step, as does a
clearer account of the conditions under which one set of considerations may matter
more than another and why.
Cross-Disciplinary Political Economy Approaches

We argue that political science must be more open to and systematic about testing the
plausibility of hypotheses about immigration policy interests and preferences derived
from economics. Correspondingly, work from a more purely economics perspective
must contend with the various ways in which political institutions, conflicts and
negotiation modify and shape how preferences evolve and are expressed politically.
We seek to illustrate the advantages of such a combined approach by discussing the
contributions*actual and possible*from work that weds analytical tools from both
disciplines. We will discuss these under the three categories of states, institutions and
interest groups.
States, Economic Effects and Immigration Policy

The logic that considers the state as a unitary actor capable of pursuing national
interests predicts that states will favour open immigration in order to maximise
aggregate economic and net fiscal gains, with the proviso that these gains must be
balanced against other relevant concerns of the state that might be threatened by
immigration. To take aggregate economic gain first, economic theory suggests a clear
and powerful set of state preferences growing out of wage and income effects, but
they are in many respects the least interesting of those we discuss in this article. Some
might see them as statements of the obvious, or too simplistic to be descriptive of
actual state behaviours. The most compelling aspect of the ideas related to wage and
income effects has to do with the necessity of compensating losers from migration
and of efforts to balance the quest for aggregate gain against competing priorities.
The fiscal effects of migration, on the other hand, can be captured by policies that
seek to maximise the revenue contributions of migrants, minimise their consumption
of public benefits, or minimise the consumption of public benefits by natives that is a
response to the effects of immigration, all of which turn out to be problematic policy
objectives from the point of view of states.
The validity of broad generalisations about the policies states should pursue with
regard to immigration can be tested via comparative analysis of the immigration
policies of receiving states. There is no space here to explore this question adequately,
such studies constituting a major research agenda for immigration scholars, but
provisional evidence is mixed. Although there are numerous instances of states
adopting economically-oriented immigration policies (the ambitious postwar immi-
gration plans of Australia, for example, and the postwar guestworker schemes in
Western Europe), for every programme of this type one can point to equally impressive
restrictive measures that seem to belie economic needs. Labour-short Britain attempted
to close Commonwealth immigration in the 1960s and accepted only limited numbers
of European displaced persons after World War II. Japan and South Korea currently
pursue restrictive policies that belie labour market conditions (Seol and Skrentny 2004;
Tsuda and Cornelius 2004). If the expectation of open immigration policies is the
starting-point of economic models, then a major task is to account for the substantial
deviation of policies from that expectation in particular countries and times.
Beyond that, there is a complex interpretive issue involved in classifying immigra-
tion policies as restrictive or open. What exactly do large-scale irregular immigration,
unauthorised employment, and rolling amnesties indicate about the intentions of
policy-makers? Are they policy failures or are they at least partially intentional ‘gaps’
designed to achieve economic goals indirectly or covertly? Does a tolerance of illegal
border crossings and unauthorised work in the informal sector indicate preferences for
actual open migration policies without formally endorsing them?
Turning to the fiscal effects of immigration, support for economic hypotheses from
comparative evidence is, again, mixed. Consider first the matter of maximising
revenues from migrants. The most effective means for achieving this goal are
combating irregular immigration, suppressing immigrant participation in the
informal economy, and discouraging remittances to countries of origin. Irregular
workers are more likely than natives to participate in the informal economy and
workers there tend to underpay or avoid taxation on income altogether. Monies
dispatched back home are not spent in the country of immigration and, thus, bypass
consumption taxes. Whether states are making good-faith efforts to suppress the
informal economy is a topic too broad for serious consideration here, but estimates
suggest that informalisation is pervasive in the United States (with the number of
illegal migrants as high as 12 million) and in many European countries (Geddes 2003;
Reyneri 2001). With regard to remittances, liberal states lack the legal authority or the
means to restrict them and to do so would undermine major incentives for migration
in the first place. Indeed, the promise of remittances is employed as an inducement
for sending states to enter into migration agreements. What is perhaps even more
striking is the failure of either sending or receiving states to tax remittances in order
to redirect spending from consumption to investment in the homeland or to capture
more of the economic gains of migration in the host society (Bahgwati and
Partington 1976; Kapur and McHale 2005; Özden and Schiff 2006). In sum, states
may well wish to maximise revenues coming from migrants, but they appear ill-
equipped to achieve this end.
With respect to limiting migrant access to publicly-funded benefits, the record is
more complicated. Some immigration programmes have endeavoured to prevent
immigrants from participating in public benefits programmes. Guestworker schemes
in Europe did not specifically stipulate that immigrants could not benefit from health
care or housing subsidies, or the like. Instead, their temporary character, and the fact
that residence permits were often linked to time-limited work permits, created a
system in which immigrants who lost their jobs (and might be expected to resort to
public benefit schemes) would be impelled to return home. These plans did not work
as designed, of course. Authorities representing components of national states (welfare
bureaucracies, local governments, and the courts) foiled these schemes by upholding
immigrant claims to a vested interest in social benefits (Bommes and Geddes 2000;
Joppke 1999). States have sometimes taken aggressive steps to cut off migrant access to
public largesse, as in the case of the UK (Geddes 2000a) and the USA (Freeman 2001).
In the US case, some of the most serious efforts to limit immigrant consumption of
public benefits have come from grassroots movements in states and localities heavily
impacted by migration, and have been targeted against central government policies
seen as too generous or poorly enforced. Studies cited above that indicate that in the
USA the central government enjoys a net fiscal gain from migration whereas some
states and localities do not, suggest that central governments have an incentive to
offload the costs of immigration onto local communities.
One important fiscal issue is the possible impact of immigration on the financial
viability of unfunded public pension programmes. Immigration enthusiasts some-
times argue that, because of their relative youth and high rates of labour force activity,
immigrants make a positive contribution to the stability of pension systems and other
welfare programmes. Immigrants may also contribute to social security funds but
often never claim their benefits in retirement, either because they go back to countries
of origin, make contributions to fictional social security accounts, or die on average
earlier than native workers. Most serious studies indicate that migration can play only
a limited and temporary role in redressing demographic imbalances of populations
(United Nations 2000).
A second reason the statist political economy model needs amplification is that not
all states are alike. Liberal states may have different priorities and capacities than those
of authoritarian systems. A comparison of the outcomes of the temporary worker
schemes in Europe and the United States with those run by the Gulf states is evidence
enough of that (Castles and Miller 2003: 12833). If, furthermore, liberal states are
instrumentally or structurally capitalist, as has been argued, then we would expect their
overriding concern to be to provide ample, flexible labour for capitalist interests
(Castles and Kosack 1985). On the other hand, liberal states should, in principle, be
both more inclined and under greater pressure to compensate immigration losers
(Hollifield 2004). They might also devise immigration policies to diminish the costs to
domestic labour: limiting admissions to skilled labour, for example, mounting highly
selective policies that privilege migrants targeted to niches where labour markets are
tight, or recruiting temporary labour without political rights.
The statist perspective also invites analysis of the interaction of states, especially
strategies of competition over the recruitment of skilled migrants and the incentives
of states to enter into free migration regimes. Meyers (2002) explores this topic by
comparing international labour regimes in several regions. Geddes (2000b) treats the
role of state interests in immigration policy in shaping preferences for a community
policy in the European Union. From the aggregate gain perspective, the key question
may be how the reciprocity these arrangements are meant to establish affects access to
migrant labour and the nature of compensation available for ‘losers’.
Institutions and the Political Economy of Migration Policy

Work from the perspective of institutional analysis begins with the aggregate
economic and net fiscal gain premises, but relaxes the assumption of a unitary state
and introduces sub-state institutions. The main question posed in this analysis is
whether various sub-state institutions pursue the same or dissimilar goals with
respect to immigration and how their interaction may affect policy outcomes. The
range of institutional variables is large. We concentrate here on three: (1) intra-state
negotiations and competition among the executive, legislative and judicial
components of states, (2) varieties of political economy across states, and (3) the
roles of political parties and party systems in aggregating and expressing societal
interests.
Do executive, legislative or judicial branches, on average or in any generalisable
sense, favour immigration for economic gain, or do they follow alternative logics? It
would seem reasonable that central executives (presidents, prime ministers, and
agencies responsible for overall economic and budgetary policies) would take the
larger view of what sort of immigration policy is beneficial to long-term growth
prospects, whereas bureaucratic agencies linked to more sectoral or partial interests
(interior, labour, industry, social welfare) would exhibit more short-term and specific
preferences. Labour ministries may support short-term migration or look the other
way in the face of illegal entry or work, while interior ministries might plausibly
pursue more restrictive policies out of concern for social stability (on Japan, see
Tsuda and Cornelius 2004: 44952; on Korea, see Seol and Skrentny 2004: 498501).
In comparative studies of European countries, Joppke (1998, 1999) finds that courts
privilege the logic of rights over that of economic gain being advanced by executive
agencies.
Welfare-state institutions are especially pertinent to the issue of fiscal effects of
migration. The most common welfare-state typology differentiates social democratic,
corporatist, and liberal varieties. Other things being equal, one would anticipate that
the most comprehensive and inclusive models*the social democratic and
corporatist*would be most vulnerable to fiscal pressures arising from migration.
To address this issue adequately, we need to know the rates of migrant participation
in welfare programmes across democracies, public perceptions of and attitudes
toward these rates, and the role of immigration in stimulating backlash against
welfare programmes. We have only limited information on these issues.
Brücker et al. (2002: 8990) conclude, on the basis of extensive cross-national
analysis of leading receiving countries, that some extensive welfare states do attract
migrants, some benefits schemes distort migrant streams, migrant welfare depen-
dency is greater than their socio-economic characteristics would predict, and there
are strong residual dependency effects in countries with generous programmes (cf.
Borjas 2002; Reitz 1998). Hanson (2005) shows for the United States that migrant
welfare programme participation varies modestly over time but tends to substantially
outstrip native use (2005: 28). However, migrant welfare participation rates vary
widely across the states. The imputed fiscal burden of immigration on states is a
function of the size and characteristics of the state’s migrant population (especially its
average skill endowment) and the generosity of the state’s welfare programmes.
Hanson shows that the immigrant fiscal burden is much larger on the high welfare/
high immigration states of New York and California than it is on the low welfare/high
immigration states of New Jersey, Florida, Texas and Arizona (2005: 37).
Comparative data on the link between public perceptions of immigrant use of
public benefits and support for the welfare state are scarce and contradictory
(Brücker et al. 2002; Fetzer 2000). Whether immigration is playing a role in eroding
support for the welfare state among native voters is an important question that is
inherently difficult to answer and that has been too little studied. Bommes and
Geddes (2000) and Banting (2000) avidly contest the notion that there is any evidence
to support the claim. On the other hand, Hanson (2005) and Hanson et al. (2005)
present evidence consistent with the interpretation that welfare reforms in the United
States in the 1990s that sought to reduce immigrant access to benefits had the effect
of reducing high-skilled natives’ support for immigration restrictions.
Moving beyond the internal structure of state authority, we can examine variations
in the structural relationships between states, capital and labour. Advocates of
‘varieties of capitalism’ identify two types of political economy: the coordinated
market and liberal market (Hall and Soskice 2001). This typology focuses on the
means by which firms in different countries resolve coordination problems with
respect to their core competencies (industrial relations, corporate governance, inter-
firm relations, and relations with their own employees). The approach offers micro-
foundations to explanations of why national responses to globalisation vary along
predictable lines. Another common typology distinguishes between social demo-
cratic, corporatist, and liberal political economies or welfare states (Esping-Andersen
1990; Wilensky 2002). Neither the ‘varieties of capitalism’ literature nor welfare-state
typologies have systematically considered the implications of their models for
responses of firms or states to international migration. It seems plausible that states
more closely linked institutionally to organised labour and business, and committed
to national-level bargaining over economic and social policy, would develop
distinctive migration policies. For example, coordinated market economies might
be expected to pursue stricter enforcement of labour market regulations and more
aggressive development of activist labour market policies. These should reduce the
likelihood of the emergence of dual labour markets and large underground sectors
dominated by immigrant workers. Liberal market economies, for their part, can be
expected to tolerate higher levels of illegal immigration, more unauthorised labour,
and more business activity of questionable legality (Freeman 2004: 9535).
Political parties are key institutions in the process by which immigration policy is
formulated, but because they aggregate blocs of voters and organised groups they
could as sensibly be discussed in the next section on interest groups as here.

Economic models drawn from the labour market and trade literatures suggest that
liberal migration programmes produce wage and income effects that favour capital
over labour. We predict, therefore, that left parties tied to organised labour tend to
support restrictive immigration measures while conservative, business-oriented
parties support open immigration. Although there is astonishingly little systematic
study of the immigration policy positions of mainstream parties, as opposed to that
of extreme-right parties, one can piece together evidence that appears to contradict
these hypotheses. Left parties seem torn between fealty to the indigenous working-
class component of their base and responding to their intellectual and professional
supporters’ concern to protect the interests of migrant workers. They have, on the
whole, adopted more liberal positions on immigration than have parties on the right.
The latter have been equally split over solicitousness of the interests of business and
attentiveness to grassroots, anti-immigrant sentiment in their ranks. On the whole, it
is probably fair to say that left parties have tended to resolve the tensions they
confront in favour of more open policies, whereas conservative parties have tended to
resolve theirs in favour of more restriction (on the US, see Gimpel and Edwards 1999;
on the UK, see Messina 1989 and Layton-Henry 1992; on Australia, see Grattan 1993;
McAllister 1993; Rubenstein 1993). Money (1999) presents a provocative thesis
linking the immigration positions of mainstream parties in Britain, France and
Australia to the emergence of ethnic tensions in local constituencies critical to the
outcome of national elections. There is also a growing literature that systematically
explores the linkages between electoral rules and the emergence or success of
extreme-right parties (Givens 2005; Golder 2003; Jackman and Volpert 1996). The
success of extremist parties greatly limits the options of mainstream parties and,
generally, pushes them to the right on immigration issues.
Whether or not anti-immigrant attitudes are linked to public discontent with the
welfare state, there is evidence that one of the factors leading voters to support
extreme-right political parties in Europe is the perception of immigrant abuse of the
welfare system (Kessler and Freeman 2005). Fiscal effects present interesting
challenges to the mainstream political parties. We saw above that left and right
parties have trouble navigating the contradictory pressures created by the economic
effects of migration. A similar pattern emerges with respect to fiscal effects.
Conservative parties are naturally inclined to try to limit immigrant use of welfare
in order to contain fiscal costs, but both pro-business and free-market inclinations
push them in the opposite direction. Left parties, on the other hand, are typically in
the position of seeking to expand immigrant access to welfare programmes while at
the same time defending immigration policies on economic grounds.
Interest Groups in the Migration Policy Process

Work in this vein employs standard production function and trade analysis to predict
who wins and who loses from immigration’s impact on labour supply and demand.
Economic models suggest that class cleavages, especially those between skilled and
unskilled labour, on the one hand, and organised labour and organised employers, on
the other, are at the heart of immigration policy contestation. Labour market and
trade theories predict who should experience concentrated or dispersed gains and
losses from migration. Work combining these theories with interest-group analysis
goes on to ask how groups mobilise or fail to mobilise to defend their interests. The
chief advance of this combined perspective over either of its components is
recognition that wage and income effects predicted by economic theory are not
automatically translated into political demands. Political analysis of interest groups is
supplemented, on the other hand, by theoretically driven expectations of the likely
benefit/cost consequences of migration of skilled or unskilled labour.
Pioneering work on the economic sources of individual attitudes towards
immigration has been done by Scheve and Slaughter (2001) and O’Rourke (2003).
Using public opinion polls conducted in the United States, Sheve and Slaughter find
support for hypotheses derived from the Heckscher-Ohlin and the proportional
factors trade models.8 Specifically, they find that there is a robust skills cleavage over
immigration policy, with highly skilled workers being less likely to support
restrictionist immigration policies and low-skilled counterparts more likely to do
so. These findings follow from the two models’ hypothesised effects of immigration on
workers at different skill levels. Their findings suggest ‘the potential for immigration
politics to be connected to the mainstream redistributive politics over which political
parties often contest elections’ (Scheve and Slaughter 2001: 144). O’Rourke (2003)
points out that Scheve and Slaughter cannot adequately test the H-O model with data
from a single country. The theory predicts that the impact on immigration attitudes of
being skilled or unskilled should depend on a country’s skill endowments, with the
skilled being less anti-immigration in more skill-abundant countries than in more
unskilled-labour-abundant countries. O’Rourke tests the model against data from 24
countries with varying skill endowments (proxied by GDP per capita). He finds strong
support for the hypotheses as they relate to attitudes toward globalisation, but less
impressive support for his hypotheses on immigration attitudes. However, his data
confirm the theory’s prediction that, other things being equal, a person who is
protectionist is also likely to be anti-immigrant, and vice-versa.
Missing from these intriguing studies, of course, are propositions about the likely
political expression and impact of the preferences opinion polling uncovers. If
immigration policy were set by referendum, then the median voter would decide
policy (see McGann 2003 for a critique of median voter models applied to
immigration). Except for Switzerland, however, immigration policy is made through
legislative and executive bodies that are more or less constrained by electoral
competition that is typically decided by issues unrelated to immigration. In the
legislative, administrative and electoral process the interests of organised groups are
more important than the opinions of individuals. Economic theory has the most to
say about the likely preferences of labour and capital; in contemporary democracies
this means the trade unions and employer federations.
At their most basic, economic models predict that trade unions should resist
immigration because it imposes downward pressure on wages. The introduction of
the idea that skilled and unskilled workers may have contrasting interests over
immigration, and that this might depend on the skill endowments of the countries
involved, greatly complicates the matter. Research should, following this line of
reasoning, concentrate on whether a country’s trade unions are organised along skill
lines, how densely organised the workforce is, and how cohesive trade federations are.
Most research in the rich Western countries shows that trade unions have
traditionally taken a protectionist stance toward immigration. This has at times
involved tolerance of migrants where they are guaranteed national-level wages and
conditions, or where their recruitment is carefully targeted toward sectors with
demonstrable shortages. In terms of our models, trade unions have tolerated
immigration that is complementary to national labour, and opposed immigration
that substitutes for it. Recently, some scholars have argued that the unions have
undergone a change of heart and have embraced a more liberal view of immigration
(Haus 1995; Watts 2001). While these studies point to puzzling and important
developments in immigration politics, they have not advanced convincing explana-
tions for them. Perhaps the trade unions have become more enlightened, perhaps
they have resigned themselves to the inevitability of migration and are making the
best of a bad situation, or perhaps the skill mix of contemporary entrants has
modified their economic costs and benefits as experienced by labour.
Freeman (1995; cf. Wilson 1980) predicts four modes of politics reflecting patterns
of cost/benefit consequences of migration and the incentives they produce for
individuals and groups to mobilise politically. Concentrated benefits and diffuse costs
produce client politics dominated by beneficiary groups; diffuse costs and benefits
yield majoritarian politics with no clear winners or losers; concentrated costs and
diffuse benefits produce entrepreneurial politics as adversely affected groups seek to
escape bearing the burden of policies; and concentrated costs and benefits spawn
interest-group competition between roughly evenly matched adversaries.
A major deficiency of the model was the absence of theoretically driven
expectations as to whether immigration produces concentrated or dispersed costs
and benefits (McGann 2003). The introduction of wage and income effects is a
promising avenue for clarifying these matters. Our previous discussion of the
significance of the size of migration’s wage and income effects is relevant to the issue
of the concentration and dispersion of benefits and costs. What is required is the
addition of characterisations of interest-group configurations, in particular political
systems. The concentration or diffuseness of effects, in this analysis, depends on the
concentration and diffuseness of the interest groups affected by them (that is, if the
number and range of groups is small or large and if the groups are themselves
strongly organised or not). Consider a 2 2 matrix with economic cost (benefits) and
political mobilisation on the axes. If economic costs (benefits) are large and political
groups concentrated, we get client politics. If economic costs (benefits) are large and
political groups diffused, we get interest-group politics. Where economic costs
Table 3. Wage and income effects, political mobilisation and modes of politics
Political mobilisation
Concentrated Diffuse
Large Client Interest group

Wage/income effects
Small Entrepreneurial Majoritarian
(benefits) are small and political groups concentrated, entrepreneurial politics should
follow; and small-cost (-benefit) diffuse groups should yield majoritarian politics. We
predict the same four modes of politics as in Freeman (1995), but with different
characterisations of the independent variables (see Table 3).
It is a commonplace that immigration politics produces ‘strange bedfellow’
coalitions. Zolberg (1999) conceives of these as involving a matrix that includes the
putative economic effects of migration intersecting with their putative political/
cultural effects. In the area of the matrix where both are positive, he predicts
‘immigrationist’ coalitions composed of co-ethnics, cosmopolitans, employers and
transporters. In the area where both are negative, he predicts ‘restrictionist’ coalitions
made up of native workers, local authorities and traditional nationalists. Tichenor
(2002) suggests an alternative framework based on attitudes toward immigration
admissions and immigrant rights. Those favouring open admissions and expansive
rights for immigrants are labelled cosmopolitans; those favouring restrictive
admissions and expansive rights are nationalist egalitarians; those favouring
expansive admissions and restricted rights are free market expansionists; while those
favouring both restrictive admissions and restricted rights are classic exclusionists.
These groups yield what appear to be unnatural coalitions between liberal
cosmopolitans and business, for example, or between trade unions and classic
exclusionists. Both Zolberg and Tichenor tap into the interplay between economic
and political/cultural concerns. Both frameworks might be improved by a
consideration of the diverse political consequences of fiscal versus wage effects.
Introducing fiscal effects into the analytical equation increases the number and
range of interests potentially drawn into the political arena. As noted above, the most
important examples are tax-payers and the residents and governments of local areas
sharply impacted by immigration. The central point to register in this respect is that
fiscal issues cut across the class and sectoral lines established over wage and income
effects. Perceptions that large-scale immigration is connected to rising costs of public
services can stimulate middle-class tax revolts among voters who might normally be
supportive of immigration. Working-class voters may join a cross-class coalition in
demanding relief from the fiscal burden of large-scale migration in high impact areas.
Fiscal costs can pit service payers (tax-payers) against service providers (bureaucrats,
teachers, etc.) who argue for expanded budgets to meet immigrant demand.
As is the case with economic effects, the public perception of the fiscal effects of
immigration is not fixed, but can be deliberately shaped by interested lobbies, the
media, think-tanks, and politicians. Following the logic laid out above with respect to
wage and income effects and interest groups, we anticipate that, whether fiscal effects
are perceived to be large or small, whether their costs and benefits are concentrated or
diffuse, and whether they fall on concentrated or diffuse interest systems, will
determine the dominant mode of politics that will ensue.
Conclusion
The political economy of migration policy is a fertile field not yet fully cultivated.
Economists are increasingly asking political and policy questions and incorporating
political variables into their models. Political scientists are moving in the same
direction, but could benefit from more systematic testing of economic hypotheses
wedded to political propositions. This will require a more careful and self-conscious
elucidation of political models of migration politics as much as the borrowing of
concepts from economics. Specifically, political scientists must address where
individual preferences on migration policy come from and how these are aggregated
and processed via interest groups, institutions and states. Our partial and brief
consideration of the analytical terrain in the field of migration politics reveals its
relatively undeveloped state. The three perspectives we introduced often do little
more than identify a basket of potential independent variables with modest effort to
stipulate how and when they come into play.
Our review of attempts to interpret comparative immigration policy outcomes via
trade, labour market and fiscal theoretical premises has uncovered significant
relationships and suggestive data. Nonetheless, in a number of cases it seems
apparent that economic models can only partially account for outcomes, in some
cases perhaps not at all. These findings point to the need to take the political
dimensions of migration policy into fuller account. Given the ubiquitous discussion
of the economic dimensions of immigration phenomena in the political science
literature, we think it is imperative that the debate be put on a more rigorous and
systematic footing, yielding a more robust political economy of migration.
Notes
[1] For obvious reasons, scholars of immigration have been drawn to the cultural, ethnic and
racial dimensions of migration. We have no intention of denying the relevance of such
perspectives. Indeed, the central thrust of our argument is that neoclassical theory by itself
must necessarily fail to accommodate the complexities involved when immigrant and native
populations interact. Our focus has been on the explicitly political variables*states,
institutions, political interest groups*that come into play in forging immigration policy.
The study of the economic basis of immigration politics should make the importance of
non-economic factors all the more evident.
[2] The economic costs and benefits of immigration are difficult to assess empirically. Borjas
(1999: 6286; 2003) argues that recent immigration to the United States has put downward
pressure on the wages of low-skilled American workers, but see Smith and Edmonston (1997,
173253) and Card (2001) for contrasting views.
[3] If one reverses the standard assumption that goods are traded and factors are immobile to
permit factor mobility with goods immobile, the distributional effects of immigration mirror
those of trade (cf. Rogowksi 1989). In general, owners of a country’s abundant factors, or
resources which it possesses in relatively large supply, gain from immigration, while owners
of a country’s scarce factors lose.
[4] This result stems from the model’s strong assumptions about the long-run, product market
disciplining effects of trade and does not hold in models where the number of factors exceeds
the number of goods. See Ruffin (1984).
[5] Kuhn and Wooton (1991) argue that skilled and unskilled labour are extreme factors and
capital the middle factor in the US case. An increase in either low- or high-skilled migration
thus exercises downward pressure on wages while raising the productivity of capital.
[6] Empirically assessing the fiscal effects of immigration is a difficult and contested exercise
(Smith and Edmonston 1997). Research on the US case finds that immigrant-headed
households are more likely to receive public benefits than non-immigrant households (cf.
Borjas 1999; Fix and Passel 2002). Given that immigrants are, on average, less educated and
more likely to experience poverty and lack health insurance than non-immigrants, this
should come as little surprise.
[7] According to the National Research Council’s definitive 1997 study, the fiscal burden of
immigration for taxpayers in US states varies with immigrant population and benefits
eligibility. In California and New Jersey, for example, immigrant-headed households on
average receive net fiscal transfers annually from non-immigrant households to the order of
$3,463 and $1,484, respectively. Fiscal costs are lower in states with smaller immigrant
populations and/or less generous eligibility requirements. When distributed among all US
non-immigrant households, the net impact per household ranges from $166 (New Jersey
estimate) to $226 (California estimate). See Smith and Edmonston (1997: 27094); also
Hanson (2005: 2740).
[8] Technically, the H-O model highlights long-run changes in output or the production
process. Short-run wage effects from migration are better captured by the proportional
factors model.
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Political Economy and Migration Policy: Gary P. Freeman and Alan E. Kessler

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Journal of Ethnic and Migration Studies

Vol. 34, No. 4, May 2008, pp. 655678

Political Economy and Migration Policy

Keywords: Migration Policy; Labour Migration; Political Economy

ISSN 1369-183X print/ISSN 1469-9451 online/08/040655-24 # 2008 Taylor & Francis

applied in rational choice perspectives), economic theory and analysis may be

Statist Institutionalist Interest group

interest is in immigration policy. Should it be directed at defending national

Economics and Migration Policy: Wage, Income and Fiscal Effects

to attract migrants should encourage immigration and sending states should

In other trade models, immigration contributes to aggregate national income but

Production/ Capital, labour Profits increase, wages Class cleavages

Specific- 3 factors (capital, land, Wages decrease; profits Sectoral cleavages

Fiscal models Young, middle-aged, Greater participation in Class cleavages (?)

non-economic considerations is also critical. Identifying the relative contribution of

Cross-Disciplinary Political Economy Approaches

States, Economic Effects and Immigration Policy

Institutions and the Political Economy of Migration Policy

could as sensibly be discussed in the next section on interest groups as here.

Interest Groups in the Migration Policy Process

Large Client Interest group

Germany’s Turks’, International Migration Review, 37(1): 16393.

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