Cooperation, punishment and immigration

We study the incentive to cooperate in a nation comprised of citizens and immigrants. The level of cooperation is governed by a steady state under population dynamics, along with the behavior of individual citizens and immigrants. We provide an equilibrium characterization, exhibiting a uniquely determined positive level of cooperation in society. We then use this framework to study the impact of government programs aimed at punishing immigrants who defect. When agents produce offspring, we show that a consequence of such punishment is that, while the incentive for immigrants to defect decreases, there is an equilibrium substitution effect whereby citizens realize an increased incentive to defect. JEL codes: C73 Stochastic and Dynamic Games; Evolutionary Games; Repeated Games – D85 Network Formation and Analysis: Theory – J61 Geographic Labor Mobility; Immigrant Workers. ∗An extended abstract of this paper has circulated under the title “Cooperation in a Society with Differential Treatment of Immigrants”. †Dipartimento di Economia Politica e Statistica, Università degli Studi di Siena, Italy. Email: [email protected]. ‡Department of Economics, Washington University in St. Louis. Email: [email protected]