Love of variety and immigration

Abstract

This paper develops a political-economic analysis of immigration in a host country that operates in a direct democracy regime. It shows that, in a monopolistic competitive environment with differentiated capital intensive goods, labor liberalization is more likely to come about in the societies that have more taste for variety. Moreover, in a host country with a strong preference for variety, workers and capital owners may share the same positive stance toward labor liberalization. It follows that the latter is impossible in a perfect competitive environment. Finally, in a dynamic inter-temporal setting with strategic voters, it demonstrates that the median voter is willing to accept fewer immigrants in the first period, in order to preserve her domestic political influence in the next period because of the naturalization of immigrants. In this way, the median voter maximizes her gains from immigration by accepting more immigrants in total.