Levy, Amnon, Unemployment and feedback approach to the management of immigration by the host country, Department of Economics, University of Wollongong, Working Paper 91-12, 1991, 17.
This paper presents a broad approach to the analysis of immigration by combining aspects of both supply of immigrants and demand for immigrants. Immigration is assumed to be motivated by lack of economic and noneconomic opportunities; and, correspondingly, immigrants are classified as early immigrants, late immigrants and refugees. An optimal immigration quota's policy, which is based on a linear feedback rule and aimed at stabilizing the host-country’s unemployment level, is developed. The optimal feedback coefficient is found to be dependent upon the correlations of the number of legal immigrants in the previous period with the current numbers of illegal immigrants and vacant jobs, and upon the variances of these variables. The consequences of the feedback policy on the numbers of early immigrants, late immigrants, and illegal immigrants are discussed under the assumption that early immigrants and late immigrants generate rational expectations about incomes in the host country. This conceptual framework is applied to the United States in order to assess its immigration policy.