Problem

Suppose that the United States enacts legislation granting all workers, including newly arrived immigrants, a minimum income floor of y dollars.

a. Generalize the Roy model to show how this type of welfare program influences the worker's incentive to migrate to the United States. Ignore issues that may arise regarding how the welfare program is to be funded.

b. Does this welfare program change the selection of the immigrant flow? In particular, are immigrants more likely to be negatively selected than in the absence of a welfare program?

c. Which types of workers, the highly skilled or the less skilled, are most likely to be attracted by the welfare "magnet"?