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Migrants as Social Protection? Simulations of a Market for Work Permits Quy-Toan DoMichael LokshinMartin Ravallion Development Research Group &Europe and Central Asia RegionJanuary 2025 Policy Research Working Paper11017 Abstract Workers have the right to take up any job offer in theircountry of citizenship but not to rent out that right. Thispaper shows that relaxing this restriction using a two-sidedcompetitive market in work permits can provide a basicincome guarantee for workers in migration-destinationcountries, financed by selling temporary work permits tomigrant workers. Regulating the market by imposing a taxon work permits narrows the set of beneficiaries, the income of which can further be complemented with the revenuesfrom such tax. Substantial gains in the destination coun-tries’ gross domestic product can be expected, alongsidethe first-order gains to migrant workers who would nototherwise have access to the labor markets in destinationcountries. The paper provides a quantitative illustration bysimulating a fictitious market for work permits betweenMexico and the United States. This paper is a product of the Development Research Group, Development Economics and the Office of the ChiefEconomist, Europe and Central Asia Region. It is part of a larger effort by the World Bank to provide open access to itsresearch and make a contribution to development policy discussions around the world. Policy Research Working Papers arealso posted on the Web at http://www.worldbank.org/prwp. The authors may be contacted at abonfield@worldbank.org. The Policy Research Working Paper Series disseminates the findings of work in progress to encourage the exchange of ideas about developmentissues. An objective of the series is to get the findings out quickly, even if the presentations are less than fully polished. The papers carry thenames of the authors and should be cited accordingly. The findings, interpretations, and conclusions expressed in this paper are entirely thoseof the authors. They do not necessarily represent the views of the International Bank for Reconstruction and Development/World Bank andits affiliated organizations, or those of the Executive Directors of the World Bank or the governments they represent. MigrantsasSocialProtection?SimulationsofaMarketforWorkPermits∗ Quy-ToanDo,MichaelLokshin,andMartinRavallion† Keywords:Workpermits;migration;socialprotection;targeting;poverty.JELclassi ication:F22,J61,J68 1Introduction While evidence to date suggests limited, if any, impacts of migration on local labor marketsin high-income countries (see, e.g., Card, 1990; Ottaviano and Peri, 2012; Dustmann et al.,2013; National Academies of Sciences, Engineering, and Medicine, 2017), many citizens seemigrant workers as a threat to their living standards.Politicians often respond to thesesentiments by promising to curb immigration; they would also provide social protection toworkers affected by competition with migrants. The paper proposes a market-based policytool that could address the continuing concerns about the vulnerability of living standardsamong workers in destination countries, were these to be established. The policy idea is thata citizen of working age should be allowed to rent out her work permit – the right to take anyjob on offer in the country– for some pre-determined duration. As a citizen, she still ownsher “right to work,” interpreted as an inalienable right that comes with that citizenship butshe is now allowed to rent it out. On the other side of the new market, time-bound workpermits would be available for purchase to people with no right to work in the destinationcountry. The price of the work permit, therefore, would balance the two sides of the market,so that the total work time rented out by the citizens equals the total work time purchased. Such a market would have benefits for both origin and destination countries. It allowsmigrant workers to access high-earning employment in destination countries. In equilibrium,migrant workers would be more productive than the domestic ones who had sold their workpermits, hence contributing to the domestic economies.Finally, the market mechanismleads domestic workers to self-select into being beneficiaries of social protection transfersfinanced by the sale of these permits. Thus, the policy provides what we dub a Basic IncomeGuarantee, defined as a level of income that each worker in the destination country can beassured of without working.By providing a floor below which individual welfare will notfall, the option to sell a work permit and benefit from a Basic Income Guarantee provides asafety net that might encourage some individuals to take entrepreneurial risks they otherwisewould not consider (Ravallion et al., 2008). Furthermore, the work permit is taxable and the tax rate levied by the government wouldbe a key policy instrument for the targeting. By taxing work permits, the government affectsthe size of the market, hence determi