Unilateral Trade Policy and Migration when Economies Differ in Size and Efficiency

Under imperfect competition model of trade, we analyze the impact of migration on the source and receiver economies which are different in size. Firms located in each economy are heterogeneous. Migration occurs due to wage differentials from the small economy to the large one. In the presence of a one-way trade with a tariff set by the small economy, a homogenous good is produced under Cournot competition in each country. Receiving migrants benefits the big economy while departure of migrants hurts the small economy. No trade-policy response, by the small economy, is effective to compensate for the loss of welfare.