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Illegal Migration, Wages, and Remittances: Semi-Parametric Estimation of Illegality Effects

Author

Listed:
  • Schluter, Christian

    (University of Southampton)

  • Wahba, Jackline

    (University of Southampton)

Abstract

We consider the issue of illegal migration from Mexico to the US, and examine whether the lack of legal status causally impacts on outcomes, specifically wages and remitting behavior. These outcomes are of particular interest given the extent of legal and illegal migration, and the resulting financial flows. We formalize this question and highlight the principal empirical problem using a potential outcome framework with endogenous selection. The selection bias is captured by a control function, which is estimated non-parametrically. The framework for remitting is extended to allow for endogenous regressors (e.g. wages). We propose a new re-parametrisation of the control function, which is linear in case of a normal error structure, and test linearity. Using Mexican Migration project data, we find considerable and robust illegality effects on wages, the penalty being about 12% in the 1980s and 22% in the 1990s. For the latter period, the selection bias is not created by a normal error structure; wrongly imposing normality overestimates the illegality effect on wages by 50%, while wrongly ignoring selection leads to a 50% underestimate. In contrast to these wage penalties, legal status appears to have mixed effects on remitting behavior.

Suggested Citation

  • Schluter, Christian & Wahba, Jackline, 2009. "Illegal Migration, Wages, and Remittances: Semi-Parametric Estimation of Illegality Effects," IZA Discussion Papers 4527, Institute of Labor Economics (IZA).
  • Handle: RePEc:iza:izadps:dp4527
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    References listed on IDEAS

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    Cited by:

    1. Nelly Elmallakh & Jackline Wahba, 2022. "Return migrants and the wage premium: does the legal status of migrants matter?," Journal of Population Economics, Springer;European Society for Population Economics, vol. 35(4), pages 1631-1685, October.

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    More about this item

    Keywords

    non-parametric estimation; control functions; selection; counterfactuals; illegality effects; illegal migration; intermediate outcomes; Mexican Migration Project;
    All these keywords.

    JEL classification:

    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers
    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
    • J40 - Labor and Demographic Economics - - Particular Labor Markets - - - General

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