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Fortress Europe?: A critique of the economic case for immigration

Dearden, Stephen J.H. (2007) Fortress Europe?: A critique of the economic case for immigration.

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Abstract

This paper provides a critical review of the economic costs and benefits involved in the international migration of labour. Mass immigration in the post war period has been experienced by all western European Countries and in policy terms, is an EU issue. This paper commences with an examination of recent trends in migration, distinguishing between stocks and flows and highlighting the data limitations. It then addresses the demographic argument for immigration, which is easily dismissed, and then turns to the more substantive economic analysis. Commencing with the conventional international welfare maximising advantages of international labour mobility it will challenge its simplifying assumptions, placing the analysis clearly within the context of the indigenous population’s economic interests, which is most relevant for the policy debate. It considers the benefits to consumers and employers, the economic contribution of skill complementarity and the macroeconomic benefits of migration in reducing inflationary pressures. It then examines the potentially adverse economic impact upon competing labour, reviewing the available empirical evidence on the wage and employment consequences of migration and the econometric problems presented. Attention then turns to the more central issue of the wider impact upon public finances – fiscal transfer. Here definitions of the ‘immigrant community’, the relevant time horizon and the nature of the immigration (permanent versus temporary; skilled verses unskilled) become crucial. The limitations of these estimated effects is again emphasised; in particular their failure to account for the impact upon social capital such as housing, education and health and the possible existence of externalities (e.g. congestion costs). Although some broad criteria can be established for maximising the benefits to the indigenous population of immigration it emphasises the difficulty of establishing robust empirical estimates and the judgments involved in defining both the ‘indigenous populations’ and the appropriate timeframe. Further it is argued that non-economic considerations, such as the value placed upon indigenous cultural homogeneity, the consequences for political stability or security, are likely to be far more significant considerations in the policy debate than economic considerations.

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