The purpose of this paper is to explain the attitudes toward immigration and the formation of immigration policy in a small open economy setting including a non-traded sector and imperfect labour mobility across sectors. The direct democracy approach is used to transmit voters ’ attitudes into immigration policy. I find that the voters regardless of their skill level will be opposed to the inflow of low-skilled immigration and will favor high-skilled immigration, if the domestic non-traded and imported goods are poor substitutes in consumption. If the degree of substitution is between non-traded and imported good is sufficiently high, a country with a high-skilled (low-skilled) median voter will be favorable (opposed) to both low-skilled and high-skilled immigrants. At an economy wide level, higher skill level of voters makes them more tolerant towards immigration
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