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Smuggling Humans: A Theory of Debt-financed Migration

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Author Info
Guido Friebel
Sergei Guriev

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Abstract

We introduce financial constraints in a theoretical analysis of illegal immigration. Intermediaries finance the migration costs of wealth-constrained migrants, who enter temporary servitude contracts to repay the debt. These debt/labor contracts are easier to enforce in the illegal than in the legal sector of the host country. Hence, when moving from the illegal to the legal sector becomes more costly-for instance, because of stricter deportation policies-fewer immigrants default on debt. This reduces the risks for intermediaries, who are then more willing to finance illegal migration. Stricter deportation policies may thus, ex ante, increase rather than decrease the flow of illegal migrants. Furthermore, stricter deportation policies worsen the skill composition of immigrants. While stricter border controls decrease overall immigration, they may result in an increase of debt-financed migration. We also show that there are complementarities between employer sanctions and deportation policies. We use available evidence to check the empirical consistency of the theory. (JEL: J61, K42, O17) (c) 2006 by the European Economic Association.

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Article provided by MIT Press in its journal Journal of the European Economic Association.

Volume (Year): 4 (2006)
Issue (Month): 6 (December)
Pages: 1085-1111
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Handle: RePEc:tpr:jeurec:v:4:y:2006:i:6:p:1085-1111

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  1. Guillermina Jasso & Douglas S. Massey & Mark R. Rosenzweig & James P. Smith, 2004. "The New Immigrant Survey Pilot (NIS-P): Overview and New Findings about U.S. Legal Immigrants at Admission," Labor and Demography 0403002, EconWPA. [Downloadable!]
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  3. Epstein, Gil S. & Weiss, Avi, 2001. "A Theory of Immigration Amnesties," IZA Discussion Papers 302, Institute for the Study of Labor (IZA). [Downloadable!]
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  4. Chiswick, Barry R. & Hatton, Timothy J., 2002. "International Migration and the Integration of Labor Markets," IZA Discussion Papers 559, Institute for the Study of Labor (IZA). [Downloadable!]
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  5. Genicot, Garance, 2002. "Bonded labor and serfdom: a paradox of voluntary choice," Journal of Development Economics, Elsevier, vol. 67(1), pages 101-127, February. [Downloadable!] (restricted)
  6. Galenson, David W., 1984. "The Rise and Fall of Indentured Servitude in the Americas: An Economic Analysis," The Journal of Economic History, Cambridge University Press, vol. 44(01), pages 1-26, March. [Downloadable!]
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  10. Piketty, Thomas, 2000. "Theories of persistent inequality and intergenerational mobility," Handbook of Income Distribution, in: A.B. Atkinson & F. Bourguignon (ed.), Handbook of Income Distribution, edition 1, volume 1, chapter 8, pages 429-476 Elsevier. [Downloadable!] (restricted)
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  13. Zimmermann, Klaus F, 1995. "Tackling the European Migration Problems," Journal of Economic Perspectives, American Economic Association, vol. 9(2), pages 45-62, Spring. [Downloadable!] (restricted)
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  15. Kevin H. O'Rourke & Jeffrey G. Williamson, 2001. "Globalization and History: The Evolution of a Nineteenth-Century Atlantic Economy," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262650592.
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  18. David Wilson & Harald Bauder, 2001. "Introduction," Tijdschrift voor Economische en Sociale Geografie, Royal Dutch Geographical Society KNAG, vol. 92(3), pages 258-260, 08. [Downloadable!] (restricted)
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  1. Bianchi, Milo, 2006. "Immigration Policy and Self-Selecting Migrants," Working Paper Series in Economics and Finance 627, Stockholm School of Economics, revised 02 Nov 2006. [Downloadable!]
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