Oct 3, 2018 in Law

Simon principle states that if the marginal immigrant makes a non-negative contribution to the treasury, one should continue to accept immigrants until the part played goes to zero. The relationship of consumption of public goods and contribution of tax revenue for foreign-born populations can be viewed in an optimistic or pessimistic way.

When viewed in the optimistic way, one can say that the foreign-born consumption begins later in life. This is because the immigrants arrive later in life. The delayed use of public services paired with the nature of consumption, and the existence of a positive discount rate leads to intensive foreign-born consumption of public goods. This occurs at the end of the immigrant’s productive life.

The pessimistic case is the opposite of the optimistic view. It reduces the earning capacity of the foreign born, this in turn simultaneously raise their public goods consumption hence lowering tax payment. They now act as a drain on the government funds and the native-born support them financially. One weakness of the Simon Principle is the labor market. Job opportunities have become the issue of the day in the modern world. Jobs could be exported to low-wage countries or immigrants will replace labor in the destination country. The second weakness is capital market. Various countries have clearly and accurately recognized that immigrants can increase the stock of money in the receiving country (Akbari & DeVoretz, 1992).

The third weakness is demographic externalities. Immigration policy influences population size, age structures, and population growth rate. Simon principle overlaps the relation between immigration, population size, and economic growth. This is due to the argument that demographic forces have a positive effect on economic development (Aescobar, 2004).

The last weakness is other pecuniary externalities. Redistributive consequences on relative factor and goods prices may develop from the presence of immigrant labor. Under static conditions the price of labor-intensive goods, or more likely services, will decline in immigrant-intensive sectors raising the consumer surplus of these immigrant-intensive goods or services (DeVoretz).

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