A Role for Sunspots in Explaining Endogenous Fluctutations in Illegal Immigration
AbstractIn this paper we provide an alternative explanation for why illegal immigration can exhibit substantial fluctuations despite a constant wage gap. We develop a model economy in which migrants make decisions in the face of uncertain border enforcement and lump-sum transfers from the host country. The uncertainty is extrinsic in nature, a sunspot, and arises as a result of ambiguity regarding the commodity price of money. Migrants are restricted from participating in state-contingent insurance markets in the host country, whereas host country natives are not. We establish the existence of sunspot equilibria that are not mere randomizations over certainty equilibria. Volatility in migration flows stems from two distinct sources: the tension between transfers inducing migration and enforcement discouraging it and secondly the existence of a sunspot. Finally, we examine the impact of a change in tax/transfer policies by the government on migration.
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Bibliographic InfoPaper provided by Department of Economics, University of Missouri in its series Working Papers with number 0312.
Length: 41 pgs.
Date of creation: 26 Sep 2003
Date of revision:
Sunspots; Immigration; International Migration;
Find related papers by JEL classification:
- F22 - International Economics - - International Factor Movements and International Business - - - International Migration
- F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission
This paper has been announced in the following NEP Reports:
- NEP-ALL-2005-01-09 (All new papers)
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