The Vicious Circle of Xenophobia: Immigration and Right-Wing Populism

We investigate the relationship between immigration and right-wing populism, which we characterize as a self-reinforcing process. Anti-immigrant rhetoric and populist policies lead to a deterioration in the skill level of immigrants. This in turn fuels populist support. Historical and contemporary studies are suggestive of such dynamics. In particular, recent cross-country evidence shows that low-skill immigration tends to exacerbate populism, while high-skill immigration tends to mitigate it. Conversely, populist policies and xenophobic attitudes have a strong repulsive effect on highly-skilled immigrants and result in adverse immigrant selection. We use the empirical results from those studies to inform a theoretical model of joint determination of immigrants’ skill-ratio and right-wing populism levels. The model displays multiple equilibria. In this framework, structural trends such as internet penetration, erosion of the middle class, demographic pressure from poor countries or adverse cyclical shocks make the inferior equilibrium – the vicious circle of xenophobia -- more likely.