DP1271 | International Migration Controls

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We study immigration control in a simple one-good model of a homogeneous population in a congested world. We compare quota, the predominant instrument of immigration control, with an entrance price or immigration toll. In our model, an absence of immigration controls (a world of free movement) is first-best efficient and equitable. We show that when the income disparity at the initial population is sufficiently large, a quota system is characterized by an inefficient prohibition of immigration. Tolls restore efficiency, but enable the migrant-receiving country to capture all efficiency gains from migration. We conclude that free movement dominates tolls, and tolls dominate quota.