The supply-of-immigrants function and taxation of immigrant's incomes

This paper considers the derivation of the commonly estimated macro supply-of-migrants equation from a discrete choice-of-location theory, in which tastes are stochastic. This approach highlights a number of economic and econometric problems inherent in popular forms of this equation. A logit specification of the supply function of U.S. immigrants is presented, using aggregated data on applications for labor certificates rather than observed movements. A modest simulation then follows, reporting the sensitivity of migration flows, hours worked by immigrants, and tax revenues, under alternative rates of Bhagwati's proposed tax on U.S. immigrant's incomes.