Abstract

Significant “guestworker” immigration occurs when the state lacks the capacity to inhibit rent-seeking by private interests that benefit from imported labor. Policies allowing imported labor result in government subsidies for employers’ profits. These subsidies are usefully conceived as rents. A developmentalist state will constrain the creation of such rents, especially because imported labor carries long-term costs not borne by employers and inhibits productivity growth and positive structural change. A clientelist state falls prey to this type of rent-seeking because of a weaker institutional capacity for creating conditions that make alternative solutions feasible and profitable for employers.