The international mobility of low-skilled workers is constrained by
immigration restrictions set by rich countries, preventing extreme
poverty from declining in the developing world. Under aversion to
extreme poverty, one country's immigration policy affects the
welfare of other countries: "nationalist" political decisions are
subject to a prisoner's dilemma. Taking advantage of efficiency
gains from coordination, we propose an alternative allocation of
labor, which minimizes extreme poverty while keeping rich countries
as well off as in the nationalist situation. This allocation can be
decentralized through international taxes and subsidies. Numerical
simulations show that the role of aversion to poverty is negligible
when considering each country separately, but becomes important for
the design of a coordinated migration policy.