Inequality and Immigration Policy

How does inequality between capital and labor affect immigration policy? Increasing inequality can heighten anti-immigrant attitudes among host-state workers. Yet, for labor-intensive firms, their increasing share of the value added provides more business opportunities to expand their production, which in turn leads to increased business support for open immigration. Given these countervailing pressures of rising inequality in immigration policymaking, we argue that a country's level of economic development holds the key to the causal mechanism between inequality and immigration policy openness. In less-developed economies where local and immigrant workers compete for the same jobs, rising inequality leads to more restrictive immigration policy. In advanced economies where local and immigrant workers are complements, rising inequality leads to less restrictive immigration policy. Using data on the capital share of the value added in the industrial sector as a measure of inequality in 24 democracies from 1947 to 2006, we find support for our argument.