An economic trade-off in entry restrictions during pandemic

This article investigates the relationship between a country’s economic reliance on immigrant labour and the stringency of its border controls during a pandemic. We build a theoretical framework where a country chooses its stock of immigrant labour, a fraction of who can infect natives, with an objective function that increases with production but decreases with the size of infected natives. It predicts that (i) the incentive to loosen entry restrictions increases with both the immigrant intensity of production and the domestic containment capacity; and (ii) the marginal effect of the immigrant intensity is amplified by the domestic containment capacity. Testing these predictions against COVID-19 data, we find support for the direct effects (i) but not for their interaction (ii). Our results suggest that while countries weighed the economic costs of entry restrictions, they were more conservative than theoretically predicted, likely reflecting the high uncertainty and lack of precedent.