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At a time when the debate on solidarity in the EU is blocked due to the failure of the relocation system proposed by the European Commission, we are happy to publish an article by economist Hillel Rapoport, which demonstrates an alternative to the present system. We hope that this article can serve to re-open the debate on the different possibilities for responsibility-sharing in the EU.

The article originally appeared in French on We thank Le Monde for their authorisation to publish the English translation on this blog.

The tragedies of the past summer have shaken public opinion and caused a radical change in the positions of European leaders, who increasingly rallied to the idea of refugee admission quotas. On the quantitative side, it is not for economists to say whether to integrate 40, 160 or 800,000 refugees. This is a political decision which must be based on humanitarian considerations and an assessment of the respective societies’ capacity (both socio-cultural and economic) to absorb refugees. However, on these two issues, economic analysis can help improve the European Unions’ response to the migrant crisis.

My colleague Jesus Fernandez-Huertas Moraga (University of Madrid) and I proposed a system of refugee admissions quotas within the European Union that are both “tradable” and accompanied by a “matching” mechanism. These tools have several advantages: they would lower the anticipated costs for the host country, and would therefore increase the likelihood that states would vote in favour of the amended system; they would take into account the preferences of both refugees (in terms of destination) and the host country (regarding the profile of the refugees they wish to host) as far as possible; and they would counter the race to the bottom on humanitarian protection.

“Tradable” admissions quotas

The tradable quota system aims to achieve a common objective at the lowest cost. In such a system, parties who are at an advantage in achieving the objective are given the opportunity to exploit this advantage. In our case, this amounts to having the opportunity to choose ones’ preferred means of solidarity, by choosing whether to receive refugees or fund the reception of refugees by others, at a price which renders each country’s decision compatible with the decisions of all the others.

In this respect, the European Commission’s proposals appear very arbitrary and, if anything, counter-productive. For example, when presenting its projects for a permanent allocation mechanism in September 2015, the Commission proposed that Member States which refuse to take part in the quota system should be financially sanctioned, with the proposed sanction amounting to 0.002% of that country’s GDP. Let’s take a concrete example: in the case of France, 0.002% of 2,400 billion Euro (France’s GDP) divided by 30,000 (its quota under the emergency mechanism) is equivalent to 1,600 Euro per refugee. At this price, one could fear that the sanctions introduced may lead to the opposite of the intended result. The accompanying matching schemes we propose alongside a tradable quota system (we see both components as necessary, that is, we would not propose the latter without the former) are also quite well known. They were introduced in the US in a wide range of contexts – from matching students with universities, to matching kidney donors and recipients – and earned their main promoter, Alvin E. Roth (Stanford), the Nobel Prize for Economics in 2012.

The matching mechanism could be applied to the refugee issue in the following way. Asylum seekers would rank possible destinations in order of preference, and would themselves be listed in a random order. The first person on the list would receive his favourite destination, as would the second and so on until the preferred destination of a migrant is no longer available. This person would be awarded their second choice and so on until all quotas are fulfilled. Moreover, the destination countries can declare the profile of refugees they wish to favour (according to criteria to be defined and agreed upon).

The more heterogeneous the preferences of countries, the more likely they are to receive refugees whose profile is similar to that requested. This procedure (several algorithms are possible) can strike a balance between the position of many NGOs that allowing the refugees to settle wherever they want is the best way to guarantee their future integration, and an approach which assumes that a “true” refugee must agree to go anywhere as long as their protection is guaranteed.

Preventing a race to the bottom on humanitarian protection

A system of quotas for admitting refugees, whether exchangeable or not, presents a significant risk of humanitarian dumping. For example, if Hungary were to accept the quota system, what would prevent it from hosting its lot of refugees, but placing them in poor material conditions and denying them any prospect of future integration? Of course, Hungary remains bound by the minimum standards set out in the recast Reception Conditions Directive, even if the rules in the Directive are not always implemented sufficiently by Member States. The matching procedure, in which a country can only accommodate migrants from within the pool who have chosen it as a possible destination, is not in itself a sufficient guarantee. Indeed, Hungary could deter migrants from seeking asylum there by advertising that bad conditions await them.

However, the juxtaposition of the two components – tradable quotas and matching – allows for a deterrent financial penalty to be imposed “by design” on countries which fail to collect enough asylum applications. The penalty would correspond to the fixed price on the quota market multiplied by the number of refugees accommodated below the original quota. In this scheme, if the refugees do not want to settle in Hungary, it becomes Hungary’s problem, not Germany’s, to paraphrase the Hungarian Prime Minister Viktor Orban. Or in the words of his Czech counterpart, Mr. Sobotka, if “refugees from Africa and the Middle East do not wish to settle in the Czech Republic because it is too cold,” rather than rejoicing, Czechs would be encouraged to show more warmth and compassion towards them.

A tradable quota system with a matching mechanism therefore has considerable advantages. However, it raises obvious ethical questions: does it commodify human life? (Although it should be clear that these are admission fees that are exchanged, not people.) Perfect sometimes being the enemy of good, does this system perhaps risk undermining the very values ​​of solidarity that it aims to promote? Similar questions were asked when these tools were applied to other sensitive contexts such as the environment or kidney donation. These experiments demonstrate that there is usually a reasonable and workable way between ethics and economy. In Europe’s current refugee crisis, however, such a way remains to be discovered.