DP1394 | Capital Export, Unemployment, and Illegal Immigration


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This paper analyses capital export controls under majority voting. It is shown that individuals vote according to their factor endowment ratio. An individual?s optimal restriction is tighter, the lower their capital-labour ratio and the larger the country; it is also tighter if unemployment prevails. If there is illegal immigration, however, results are dramatically reversed: the conflict of interests collapses and all individuals favour unrestricted capital export until immigration is eliminated ? regardless of their relative factor endowment.