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On the Macroeconomic and Welfare Effects of Illegal Immigration

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  • Liu, Xiangbo
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    Abstract

    This paper investigates the macroeconomic and welfare effects of illegal immigration on the native born within a dynamic general equilibrium framework with labor market frictions. A key feature of the model is that job competition is allowed for between domestic workers and illegal immigrants. We calibrate the model to match some key statistics of the postwar U.S. economy. The model predicts that in the long run illegal immigration is a boon, but the employment opportunities of domestic workers are strongly negatively affected. The model also predicts that the level of domestic consumption has a U-shaped relationship with the share of illegal immigrants.

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    File URL: http://mpra.ub.uni-muenchen.de/15469/
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    Bibliographic Info

    Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 15469.

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    Date of creation: 28 May 2009
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    Handle: RePEc:pra:mprapa:15469

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    Keywords: Economic Growth; Immigration; Welfare; Search; Unemployment;

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    References

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    1. Julie L. Hotchkiss & Myriam Quispe-Agnoli, 2008. "The labor market experience and impact of undocumented workers," Working Paper 2008-07, Federal Reserve Bank of Atlanta.
    2. Cooley, Thomas F & Ohanian, Lee E, 1997. "Postwar British Economic Growth and the Legacy of Keynes," Journal of Political Economy, University of Chicago Press, vol. 105(3), pages 439-72, June.
    3. Theodore Palivos & Chong K. Yip, 2007. "Illegal Immigration in a Heterogeneous Society," Discussion Paper Series 2007_02, Department of Economics, University of Macedonia, revised Dec 2007.
    4. Merz, Monika, 1995. "Search in the labor market and the real business cycle," Journal of Monetary Economics, Elsevier, vol. 36(2), pages 269-300, November.
    5. Bond, Eric W. & Chen, Tain-Jy, 1987. "The welfare effects of illegal immigration," Journal of International Economics, Elsevier, vol. 23(3-4), pages 315-328, November.
    6. Rachel M. Friedberg & J. Hunt, 1995. "The Impact of Immigrants on Host Country Wages, Employment and Growth," Working Papers 95-5, Brown University, Department of Economics.
    7. Ethier, Wilfred J, 1986. "Illegal Immigration," American Economic Review, American Economic Association, vol. 76(2), pages 258-62, May.
    8. George J. Borjas & Jeffrey Grogger & Gordon H. Hanson, 2006. "Immigration and African-American Employment Opportunities: The Response of Wages, Employment, and Incarceration to Labor Supply Shocks," NBER Working Papers 12518, National Bureau of Economic Research, Inc.
    9. Douglas Gollin, 2002. "Getting Income Shares Right," Journal of Political Economy, University of Chicago Press, vol. 110(2), pages 458-474, April.
    10. Shi, Shouyong & Wen, Quan, 1999. "Labor market search and the dynamic effects of taxes and subsidies," Journal of Monetary Economics, Elsevier, vol. 43(2), pages 457-495, April.
    11. George J. Borjas, 2003. "The Labor Demand Curve Is Downward Sloping: Reexamining The Impact Of Immigration On The Labor Market," The Quarterly Journal of Economics, MIT Press, vol. 118(4), pages 1335-1374, November.
    12. Oliver Jean Blanchard & Peter Diamond, 1989. "The Beveridge Curve," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 20(1), pages 1-76.
    13. Thomas F. Cooley & Gary D. Hansen & Edward C. Prescott, 1994. "Equilibrium business cycles with idle resources and variable capacity utilization," Working Papers 94-22, Federal Reserve Bank of Philadelphia.
    14. Shi, Shouyong & Wen, Quan, 1997. "Labor market search and capital accumulation: Some analytical results," Journal of Economic Dynamics and Control, Elsevier, vol. 21(10), pages 1747-1776, August.
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    Cited by:
    1. Andri Chassamboulli & Theodore Palivos, 2014. "A Search‐Equilibrium Approach To The Effects Of Immigration On Labor Market Outcomes," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 55, pages 111-129, 02.
    2. 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 12-2010, University of Cyprus Department of Economics.

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