The Optimal Visa Contract

We study optimal immigration screening when immigrants differ in two privately observed dimensions, and the government designs visa contracts to maximize native welfare subject to incentive compatibility, a congestion-adjusted budget constraint, and costly verification. The model produces three results. First, screening targets the dimension where types differ and leaves the shared high dimension undistorted. Second, when the government can verify claims at a cost, the optimal policy audits wealth more intensively than skill (wealth being cheaper to verify), and concentrates verification at contracts where the temptation to misrepresent is strongest. Verification reduces both allocative distortions and information rents, but diverts fiscal resources from the public good, generating an interior optimum. Third, when immigrants' outside options are type-dependent, rather than assumed uniform, the entire mechanism reverses; binding constraints shift from downward to upward, distortions move from the bottom to the top of the type distribution, and verification targets shift accordingly. The model predicts that countries should maintain structurally different visa systems for immigrants from developing countries and from wealthy countries, consistent with observed immigration policy.