What is the immigration policy that maximizes the welfare of

What is the immigration policy that maximizes the welfare of the citizens of both countries? Explain your results.

Solution

A socially optimal immigration policy is one, which absorbs the immigrants into the domestic labor force without lowering the current wage rate of domestic workers.

If the immigrants remain unemployed, it gives rise to various social and economic costs and problems for the country where they settle down. Also, if immigrants are employed at such wage which lowers the overall wage rate at the expense of domestic resident, such policy will reduce overall social welfare of the domestic country.

On the other hand, a fair immigration policy should ease the pressure on the origin country\'s population and unemployment problem. If the immigration policy of another country is such that unemployed people get an incentive to immigrate elsewhere, domestic labor supply comes down, raising wage rate and improving the standard of living.

Thus, such an immigration policy benefits both the countries.