Income Redistribution and Self-Selection of Immigrants

We analyze the effects of governmental redistribution of income on migration patterns,using an Italian administrative dataset that includes information on almost every Italian citizen living abroad. Since Italy takes a middle ground in terms of redistribution, both the welfare-magnet effect from more redistributive countries and the propensity of the high-skilled to settle in countries with lower taxes can be empirically studied. Our findings confirm the hypothesis that destination countries with more redistribution receive a negative selection of Italian migrants. This holds true after accounting for many individual and country level covariates, migration costs, and when testing for stochastic dominance of the skill distributions of migrants and stayers. Policy simulations are run in order to gauge the magnitude of these migration effects. Based on estimated elasticities, we find that sizable increases in the amount of redistribution in Italy have small effects on the skill composition of the resident population