Chapter 7 is very interesting, and a contribution I certainly enjoyed reading. Looking at the topic, I even wondered why nobody else had tackled this problem earlier. Tobias Müller starts from the observation that the assimilation process of immigrants is different in, say, the USA from Western Europe. The famous Chiswick (1978) study suggests that foreign-born workers catch up in earnings with natives in 13 years. In the typical ‘guest-worker’ country, Germany, this does not seem to be the case at all: foreigners start at lower levels and have lower rewards to job experience than Germans (Licht and Steiner, 1994).

This differential treatment of immigrants gives rise to the suspicion of segmented labour markets for natives and foreigners. Therefore, the question arises: if natives can discriminate against foreigners, does this change the welfare assessment of immigration? One way towards this end is to look at migration policies having the potential of a Pareto-improvement – provided some sort of redistributive scheme is applied. Chapter 7 uses a different framework: welfare of natives is expressed by an explicit social welfare function of the Atkinson type, so that inequality-aversion of the social planner can be explicitly considered. The profitability of a specific migration scenario can thus be judged with respect to the inequality-aversion of the society. It turns out that for low levels of inequality-aversion immigration is beneficial for the host country, even more so if the immigrants have no access to the primary sector of the economy. The more important inequality concerns get, the less favourable immigration will be.