Three Essays on Immigration and Institutions

Chapter 1 shows how an elite can turn an institution from being inclusive to extractive, in the context of the European Union’s free movement of persons (FMP). In an international labour market, integrated by FMP across a number of member countries, we consider expansion of the market through the addition of new members. Each member government can control only immigration from non-members. The main result is that if new members are decreasing in total factor productivity, then expansion at first benefits but later hurts workers, while first hurting but later benefiting an economic elite, and benefiting a political elite throughout. Chapter 2 shows how a government sets immigration policy in the presence of entrepreneurs who undertake investment. The government and the entrepreneurs negotiate to determine the quota of immigration and the amount of contribution to be paid to the government. We also show how a government may be willing to tie its hands to an institution that constrains the immigration policy it can set. We identify conditions such that by tying its hands to such an institution, the government can increase investment in the economy. Chapter 3 analyses the effect of public good provision on the location choice of immigrants in the UK. In particular, we investigate the impact of a change in the number of schools on the location choice of immigrants by exploiting an exogenous shock provided by the Academies Act of 2010. We first employ a difference-in-difference strategy to analyse the effect of the Academies Act on immigration levels by comparing North West England and Wales, since the act was only applicable to England. In a separate analysis, we estimate a discrete choice model to examine the location choice of immigrants using a panel data of London boroughs. This model reports that a 1% increase in the number of schools in a London borough increases the number of immigrants by 1.4%, on average