The Immigration Policy Puzzle

14 Pages Posted: 18 Oct 2011

See all articles by Paolo E. Giordani

Paolo E. Giordani

LUISS "Guido Carli" University

Michele Ruta

Economic Research Division, WTO; Columbia Business School - Economics Department; International Monetary Fund (IMF)

Date Written: November 2011


This paper revisits the puzzle of immigration policy: standard economic theory predicts that free immigration improves natives' welfare, but (with few historical exceptions) an open door policy is never implemented in practice. What rationalizes the puzzle? We first review the model of immigration policy where the policy maker maximizes national income of natives net of the tax burden of immigration. We show that this model fails to provide realistic policy outcomes when the receiving region's technology is described by a standard Cobb–Douglas or CES function. Then we describe three extensions of this basic model that reconcile theory with evidence. The first introduces a cost of integration of the immigrant community in the destination country; the second takes into account the policy maker's redistributive concern across different social groups; the last extension considers positive spillover effects of (skilled) migrants on the receiving economy.

Suggested Citation

Giordani, Paolo E. and Ruta, Michele, The Immigration Policy Puzzle (November 2011). Review of International Economics, Vol. 19, Issue 5, pp. 922-935, 2011, Available at SSRN: or

Paolo E. Giordani (Contact Author)

LUISS "Guido Carli" University ( email )

Viale Romania 32
Roma, Roma 00197

Michele Ruta

Economic Research Division, WTO ( email )

Rue de Lausanne 154
CH-1211 Geneva


Columbia Business School - Economics Department ( email )

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New York, NY 10027
United States

International Monetary Fund (IMF) ( email )

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Washington, DC 20431
United States

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