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Welfare effects of illegal immigration

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Abstract

This paper analyzes the welfare effect of illegal immigration on the host country within a dynamic general equilibrium framework and shows that it is positive for two reasons. First, immigrants are paid less than their marginal product and second, following an increase in immigration, domestic households find it optimal to increase their holdings of capital. It is also shown that dynamic inefficiency may arise, despite the fact that the model is of the Ramsey type. Nevertheless, the introduction of a minimum wage, which leads to job competition between domestic unskilled workers and immigrants reverses all of the above results.

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Bibliographic Info

Paper provided by Department of Economics, University of Macedonia in its series Discussion Paper Series with number 2007_01.

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Date of creation: Dec 2007
Date of revision: Dec 2007
Handle: RePEc:mcd:mcddps:2007_01

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Web page: http://www.uom.gr/index.php?tmima=3

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Keywords: Economic Growth; Illegal Immigration;

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References

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  1. Francisco L. Rivera-Batiz, 1999. "Undocumented workers in the labor market: An analysis of the earnings of legal and illegal Mexican immigrants in the United States," Journal of Population Economics, Springer, Springer, vol. 12(1), pages 91-116.
  2. Ortega, Javier, 2000. "Pareto-Improving Immigration in an Economy with Equilibrium Unemployment," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 110(460), pages 92-112, January.
  3. Hazari, Bharat R. & Sgro, Pasquale M., 2003. "The simple analytics of optimal growth with illegal migrants," CEPREMAP Working Papers (Couverture Orange) 0301, CEPREMAP.
  4. Catalina Amuedo-Dorantes & Cynthis Bansak & Susan Pozo, 2005. "On the remitting patterns of immigrants: evidence from Mexican survey data," Economic Review, Federal Reserve Bank of Atlanta, Federal Reserve Bank of Atlanta, issue Q 1, pages 37-58.
  5. Woodland, Alan D. & Yoshida, Chisato, 2006. "Risk preference, immigration policy and illegal immigration," Journal of Development Economics, Elsevier, Elsevier, vol. 81(2), pages 500-513, December.
  6. Ethier, Wilfred J, 1986. "Illegal Immigration," American Economic Review, American Economic Association, American Economic Association, vol. 76(2), pages 258-62, May.
  7. Catalina Amuedo-Dorantes & Susan Pozo, 2006. "Remittances as insurance: evidence from Mexican immigrants," Journal of Population Economics, Springer, Springer, vol. 19(2), pages 227-254, June.
  8. Gil S. Epstein & Odelia Heizler, 2007. "Illegal Migration, Enforcement and Minimum Wage," CReAM Discussion Paper Series 0708, Centre for Research and Analysis of Migration (CReAM), Department of Economics, University College London.
  9. Moy, Hon Man & Yip, Chong K., 2006. "The simple analytics of optimal growth with illegal migrants: A clarification," Journal of Economic Dynamics and Control, Elsevier, Elsevier, vol. 30(12), pages 2469-2475, December.
  10. Alexander Kemnitz & Berthold U. Wigger, 2000. "Growth and Social Security: The Role of Human Capital," CSEF Working Papers, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy 33, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
  11. Hung-Ju Chen, 2006. "International migration and economic growth: a source country perspective," Journal of Population Economics, Springer, Springer, vol. 19(4), pages 725-748, October.
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Citations

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Cited by:
  1. Theodore Palivos & Chong Yip, 2010. "Illegal immigration in a heterogeneous labor market," Journal of Economics, Springer, Springer, vol. 101(1), pages 21-47, September.
  2. Andri Chassamboulli & Giovanni Peri, 2014. "The Labor Market Effects of Reducing Undocumented Immigrants," NBER Working Papers 19932, National Bureau of Economic Research, Inc.
  3. Karin Mayr & Steffen Minter & Tim Krieger, 2009. "Policies on illegal immigration in a federation," Working Papers CIE 23, University of Paderborn, CIE Center for International Economics.
  4. Andri Chassamboulli & Theodore Palivos, 2010. "“Give me your Tired, your Poor,” so I can Prosper: Immigration in Search Equilibrium," University of Cyprus Working Papers in Economics, University of Cyprus Department of Economics 12-2010, University of Cyprus Department of Economics.
  5. Parello, Carmelo Pierpaolo, 2012. "Indeterminacy in a dynamic small open economy with international migration," MPRA Paper 40013, University Library of Munich, Germany.
  6. Chassamboulli, Andri & Palivos, Theodore, 2012. "A Search-Equilibrium Approach to the Effects of Immigration on Labor Market Outcomes," MPRA Paper 43297, University Library of Munich, Germany.
  7. Liu, Xiangbo, 2010. "On the macroeconomic and welfare effects of illegal immigration," Journal of Economic Dynamics and Control, Elsevier, Elsevier, vol. 34(12), pages 2547-2567, December.
  8. Chassamboulli, Andri & Palivos, Theodore, 2013. "The impact of immigration on the employment and wages of native workers," Journal of Macroeconomics, Elsevier, Elsevier, vol. 38(PA), pages 19-34.
  9. Subhayu Bandyopadhyay & Dustin Chambers & Jonathan Munemo, 2012. "Foreign aid, illegal immigration, and host country welfare," Working Papers, Federal Reserve Bank of St. Louis 2012-007, Federal Reserve Bank of St. Louis.

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