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11 May 2023

Immigration and inequality: the role of politics and policies

This commentary complements the excellent chapter by Dustmann, Kastis and Preston (2022) on the relationship between immigration and economic inequality, by highlighting the central role of politics and policies in moderating this relationship. We structure the commentary in two parts. In the first part, we selectively summarise existing evidence on how politics and policies respond to immigration. In the second part, we discuss some of the pathways through which the political consequences of immigration might affect inequality. Because of the uncertainty about how these political consequences translate into (in)equality and the scarcity of empirical evidence, the second part is, by necessity, shorter and more exploratory.

We concentrate primarily on European destination countries and pay particular attention to the UK. While we focus on economic inequality between immigrants and citizens, and across different segments of the society more broadly, we complement this economic perspective with social and political dimensions of inequality.

In the first part, we discuss research on the political reactions to immigration and make the following argument: while most studies document minor direct economic effects of immigration on native employment and wages (for a summary focused on the UK, see Dustmann et al. 2022), immigration can have significant indirect or downstream economic effects through ‘political channels’.
In both representative and direct democracies, office-seeking candidates and their parties will respond to shifts in the extent to which the public perceives immigration as a problem, and they will adapt their policy platforms accordingly. Beyond this passive approach, parties anticipate and actively fuel such debates and strategically position their campaigns and platforms to exploit them. Even if anti-immigrant parties do not accumulate enough votes to win office or directly determine policy, they can force other parties to move policies closer to their party’s ideal point.

The consequences of such policy shifts can go beyond the narrow domains of immigration and immigrant integration. Most parties with robust anti-immigrant platforms in Europe are members of the far-right party family. In addition to their anti-immigrant stance, these parties are united in their emphasis on law and order, welfare chauvinism, and isolationism; see also the publications in this review’s ‘Trade and globalisation’ theme (e.g. Dorn and Levell, 2021). Even if the growth in support for these parties is primarily driven by their anti-immigrant platforms, they may use their leverage to promote and implement policies in these other areas as well – and all of them have the potential to affect inequality between immigrants and citizens, but also between other segments of society, for example along gender or employment dimensions.

These downstream effects on inequality are the focus of the second part. We argue that political reactions to immigration likely have more of an impact on inequality than immigration’s direct economic consequences. We sketch how these indirect consequences can affect the distribution of work, wages and wealth. Predictions about these consequences are, however, highly uncertain. The strength and the sign of the relationship between immigration, its political repercussions and its downstream effects on inequality depend on various moderating factors. Rather than engaging in futile attempts to speculate without evidence, the last part of this commentary seeks to point toward the dark corners where additional theoretical and empirical research most urgently needs to shed its light to illuminate this relationship.