Abstract: Illegal Migration, Wages, and Remittances: Semi-Parametric Estimation of Illegality Effects
AbstractWe 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 reparametrisation 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.
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Bibliographic InfoPaper provided by Norface Research Programme on Migration, Department of Economics, University College London in its series Norface Discussion Paper Series with number 2012037.
Date of creation: Nov 2012
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More information through EDIRC
illegal migration; illegality effects; counterfactuals; selection; control functions; non-parametric estimation; intermediate outcomes; Mexican Migration Project;
Find related papers by JEL classification:
- J61 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - 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
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-12-10 (All new papers)
- NEP-IUE-2012-12-10 (Informal & Underground Economics)
- NEP-LAB-2012-12-10 (Labour Economics)
- NEP-MIG-2012-12-10 (Economics of Human Migration)
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