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Guest Workers in the Underground Economy

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Abstract

Guest-worker programs have been providing rapidly growing economies with millions of temporary foreign workers over the last couple of decades. With the duration of stay strictly limited by program rules in most of the host countries and wages paid to guest workers often set at sub-market levels, many of the migrants choose to overstay and seek employment in the underground economy. This paper develops a general-equilibrium model that relates the flow of guest workers transiting to the underground economy to the rules of the program, enforcement measures of the host country and market conditions facing migrants at home and abroad.

Suggested Citation

  • Slobodan Djajić & Alice Mesnard, 2013. "Guest Workers in the Underground Economy," IHEID Working Papers 15-2013, Economics Section, The Graduate Institute of International Studies.
    • Handle: RePEc:gii:giihei:heidwp15-2013
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    File URL: http://repec.graduateinstitute.ch/pdfs/Working_papers/HEIDWP15-2013.pdf
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    References listed on IDEAS

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    1. Guido Friebel & Sergei Guriev, 2006. "Smuggling Humans: A Theory of Debt-financed Migration," Journal of the European Economic Association, MIT Press, vol. 4(6), pages 1085-1111, December.
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    5. Djajić, Slobodan & Vinogradova, Alexandra, 2013. "Undocumented migrants in debt," Labour Economics, Elsevier, vol. 21(C), pages 15-24.
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    10. Slobodan Djajić, 2013. "Some Essentials Of A Workable Guest‐Worker Program," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 54(2), pages 739-766, May.
    11. Ethier, Wilfred J, 1986. "Illegal Immigration," American Economic Review, American Economic Association, vol. 76(2), pages 258-262, May.
    12. Slobodan Djajić & Michael S. Michael, 2013. "Guest worker programs: A theoretical analysis of welfare of the host and source countries," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 22(3), pages 454-475, April.
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    More about this item

    Keywords

    Temporary migration; undocumented workers; underground economy;
    All these keywords.

    JEL classification:

    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration

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