This paper develops a theory of the endogenous formation of a common market in a three-country, two-factor political economy model. In the status quo, Home and Foreign implement non-discriminatory policies towards international factor flows, as to maximize the domestic median voter's welfare....

Despite restrictive migration policies, large numbers of undocumented migrants reside in many destination countries. If official migration targets are not enforced, why are they devised? To address this puzzle, we develop a political agency model with uncertainty on the migrants' supply, where...