The Political Economy of Immigration

Zachary Gochenour

Advisor: Bryan D Caplan, PhD, Department of Economics

Committee Members: Peter T. Leeson, Donald J. Boudreaux

Carow Hall, #11
July 28, 2014, 02:00 PM to 11:00 AM


This dissertation investigates the sources and consequences of political and social change regarding immigration to the United States. Specifically, I investigate the political and economic consequences of immigration on the welfare state, how immigration policy evolved in the U.S., and how changes in policy change how firms and individuals organize to circumvent immigration restriction.

The first chapter, "The Political Externalities of Immigration: Evidence from the States" explores the connection between immigrants and state-level support for spending on social welfare programs. In a standard median voter model, low-income immigration increases the size of the welfare state. Other research suggests evidence for a group-interested voter model, which predicts that welfare will shrink with an increase in low-income immigration. I contend that neither model accurately describes political reality after testing these theories with United States data from 1970 to 2010. I use a variety of measures for welfare and related public spending such as K-12 education, Medicaid, and unemployment insurance. Contrary to expectations from previous work focused on Europe, I find that the amount of immigrant-driven heterogeneity does not have a significant effect on these spending areas, whether considered in total expenditure or per capita. This could be due to countervailing pressures from these two models of voter motivation or due to factors unrelated to immigration, such as differences in institutions.

The second chapter, "Putting a Lid on the Melting Pot: The Political Economy of U.S. Immigration 1875-1925," investigates the closing of the United States to immigrants: arguably the most economically and socially significant policy shift in American history. The U.S. had virtually open borders until 1879, when the first of a series of federal laws prohibiting or limiting immigration of particular groups was passed. By 1924, immigration had been reduced to a small fraction of the peak in the 1890s. During this time frame, 42 major votes were considered in the House and 31 in the Senate to limit immigration. Using data from the U.S. Congressional record, I explain the policy shift in public choice terms: identifying voting patterns that can be explained by shifts in public and elite opinion, the incentives of policymakers, and changing economic conditions. Explanations of the policy shift from previous scholarship are evaluated in light of roll-call voting data and NOMINATE scores. Using multivariate analysis, I find that Congressional ideology was an important factor in the development of immigration restriction policy, with the most restrictive legislation passed when legislators from the rural South joined a Congressional coalition against immigration.

The third chapter, "Coyotes: The Industrial Organization of Human Smuggling," explains changes in a criminal industry structure as a result of government immigration policy. Human smuggling is a criminal enterprise where immigrants pay smugglers to help them cross borders and forge immigration documents. Over the past few decades, this enterprise has become dominated by large criminal organizations, who have displaced independent smugglers. I argue that changes in U.S. immigration enforcement policy is responsible for the change in market structure. As in any market, changes in costs can affect how producers organize. Under strict border enforcement, large criminal firms have a comparative advantage over small firms, mostly due to scale economies. Since 2001, U.S. border patrol agents have doubled, increasing the cost of border crossing and attracting organized criminal involvement. I compare this situation to the market for human smuggling in the 1980s and to legitimate firms engaged in similar but legitimate business in the pre-restriction era.