Migration, Foreign Aid and the Welfare State

Abstract

Aspects related to the links between international migration, foreign aid and the welfare state are highlighted in this paper. Migration is modeled as a costly movement from an aid-recipient developing country with low income and no welfare state, towards a rich donor, developed country with a well-developed welfare state. Within this model, it is found, among other things, that the best response of the developed donor country is to increase aid as the co-financing rate by the recipient country increases. When the immigration cost decreases, e.g. as a result of greater economic integration between the two countries, it is beneficial for the donor country to increase aid and the recipient country to increase the co-financing rate. © 2012 Blackwell Publishing Ltd.