Primary Resources, Secondary Labor: Resource Booms and Immigration Policy in the Era of Trade Liberalization

Abstract

This article argues that a natural resource boom leads to restrictive low-skill immigration policy and conditions the policy correlation between trade and immigration openness in wealthy, labor-scarce democracies. The magnitude of a resource boom changes labor-intensive firm preferences over immigration policy and how they respond to trade liberalization. In resource-booming economies, trade liberalization causes firms in the tradable sector to perish or move into the booming non-tradable sector. As firms can adjust output prices according to wage schedules in the non-tradable sector, they no longer lobby for pro-immigration policy. Without such exit options in resource-poor economies, firms seek to remain viable by supporting pro-immigration policy under trade liberalization. Without firm support for immigration, policymakers respond to anti-immigrant interests by implementing restrictive immigration policy. In terms of openness, trade and immigration policies move in the opposite direction during a resource boom but are positively correlated otherwise.