WATERLOO ECONOMIC SERIES
Abstracts of Working Papers January 1997 - December 1997
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# 9701 -- Gordon M. Myers and Yorgos Y. Papageorgiou
Immigration Control and the Welfare State
We examine immigration policy and its redistributive effects using a model of a rich country which must spend on border control in order to regulate immigration from a poor country. There are owners and workers in the rich country, and a public sector whi ch makes redistributive transfers from owners to workers. We first consider the case where illegal immigrants have access to the public sector, a situation currently observed in many countries. We show that as border control becomes more expensive inequal ity in the rich country increases, redistributive transfers may increase or decrease, some immigration is permitted and foreign aid may be used by the rich country in order to reduce the migration pressure along its border with the poor country. Because o f nonconvexities, we also show that a small decrease in the aversion to inequality or a small increase in the poor country's population can lead to the collapse of the redistributive public sector. We then consider excluding illegal immigrants from the pu blic sector (e.g. California Proposition 187). We find that the possibility of collapse vanishes and that the rich country takes the toughest official stance on immigration but does not enforce it with border controls.
# 9702 -- David Andolfatto and Paul Gomme
Monetary Policy Regimes and Beliefs
Recent monetary history has been characterized by monetary authorities that appear to shift periodically between distinct policy regimes associated with higher or lower average rates of money creation. As policy regimes are not directly observable and as the rate of monetary expansion varies for reasons other than regime changes, the general public must form beliefs over current monetary policy based on historical realizations of money growth rates. Depending on the parameters governing the behaviour of m onetary policy, beliefs (and therefore inflation forecasts) may evolve very slowly in the wake of actual regime changes, thereby exacerbating the costs of a disinflation policy. The quantitative importance of slowly adjusting beliefs is evaluated in the c ontext of a computable general equilibrium model.
#9703 -- Lutz-Alexander Busch and Ignatius J. Horstmann
The Game of Negotiations: Ordering Issues and Implementing
Agreements
In this paper, we study a two issue bargaining situation allowing for an endogenous determination of the agenda under alternative rules for implementing agreements. We uncover the settings in which different agenda structures will be employed in equilibrium, how the order in which issues are bargained over matters, and what impact the rules for implementing agreements have. We find that, if agreements are implemented as they are reached, "easy" issues are negotiated first and "hard" issues later; if agreements are implemented only after all issues are settled, then it is only the size of the surplus that determines order, with large issues settled first. We also show that all parties prefer the former rules of implementation to the letter.
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