Love of Variety and Immigration

This paper develops a political-economic analysis of immigration in a developed country that operates in a direct democracy regime. It shows that, in a monopolistic competitive environment with differentiated capital intensive commodities produced under increasing returns to scale, labor liberalization is more likely to come about in the societies that have more taste for varieties. This is due to the availability of more and cheaper varieties. It also shows that, the workers and capital owners could share the same positive stance toward labor liberalization. It follows that the latter is impossible in a perfect competitive environment. Finally, in a two period dynamic model with forward looking 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 second period due to the naturalization of the immigrants accepted in the first period. Using this strategy, the median voter maximizes her gains from immigration by accepting more immigrants in total at the end of the second period. However, the richer the forward looking median voter, the less restricted will be the policy of the host country toward immigration in the first period.