Community Research and Development Information Service - CORDIS

How the welfare state benefits from free migration

EU-funded researchers undertook a welfare comparison between trade and migration. The overall aim was to build models capable of analysing the welfare consequences of free mobility within countries, with public goods that can be congested.
How the welfare state benefits from free migration
Major issues related to migration flows include the effects of migrants on the cost of providing public goods, on the welfare of the local labour force, and on the housing market. These topic areas were the focus of the MIGRATION AND TRADE project, which sought to compare welfare consequences of freeing trade in goods and of freeing migration. Another, complementary, objective was to provide a general framework supporting the discussion of migration policies.

Given the relatively strong welfare system in many western European countries, EU policymakers are concerned about the impact that immigration flows can have on national economies. In this context, and taking into consideration the 'gains from trade' theorem, project work explored the possibilities of a similar theorem for trade in labour supply services. Researchers were also interested in determining significant differences between proving a 'gains from trade' theorem and proving a 'gains from migration' theorem. A starting point was that one important difference between the two theorems is the existence of public goods that can be congested.

MIGRATION AND TRADE efforts resulted in the advancement of a general equilibrium model where migration decisions are explicitly modelled and endogenously determined local public goods can be congested by inhabitants. By facilitating a comparison of 'free migration' and 'no migration' situations, the model points to the existence of potential Pareto gains thanks to the liberalisation of international migration. Pareto optimality supports the notion that a system enjoys maximum economic satisfaction when no individual party gains at the expense of another.

Research results offer important policy considerations and contributions relevant to regulatory measures — with regard to labour market, free trade, migration and residency. The knowledge produced and tools developed during MIGRATION AND TRADE provide a basis for introducing mechanisms geared toward securing optimal gains, for both winners and perceived 'losers' of migration.

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