Asylum Seekers in Europe: The Warm Glow of a Hot Potato

The Common European Asylum System calls for increased coordination of the EU countries’ policies towards asylum seekers and refugees. In this paper, we provide a formal analysis of the effects of coordination, explicitly modelling the democratic process through which policy is determined. In a symmetric, two-country citizen-candidate setup, in which accepting asylum seekers in one country generates a cross-border externality in the other, we show that coordination is desirable. Internalizing the externality leads to a welfare improvement over the non–cooperative outcome. However, contrary to suggestions by many observers, we show that allowing for cross-country transfers in the cooperative outcome leads to a welfare inferior outcome because the possibility of compensation exacerbates strategic delegation effects.