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The Role of Risk Preference in Immigration and Minimum Wage Policies

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  • Wang Yulian

    (School of Business, Nanjing University, Nanjing, Jiangsu, China School of International Education, Inner Mongolia Finance and Economics University, Hohhot, Inner Mongolia, China)

  • Zhu Hongfei

    (School of Economics, Fudan University, Guoquan Road 600, Shanghai 200433, China)

Abstract

This paper examines the effects of two enforcement policies and a minimum wage policy in controlling illegal immigration and improving welfare when capital is immobile. The model highlights the importance of the role of risk preference by considering various attitudes to risk held by illegal immigrants and host firms. It is shown that the effect of internal enforcement on the wage rate in host firms depends on the attitude to risk of illegal immigrants and host firms. It is also shown that the impacts of the minimum wage legislation differ according to risk preference and the degree of labor employment elasticity to the source wage. Moreover, attitude to risk is shown to be important in determining the effectiveness of policies on welfare.

Suggested Citation

  • Wang Yulian & Zhu Hongfei, 2014. "The Role of Risk Preference in Immigration and Minimum Wage Policies," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 14(4), pages 1709-1724, October.
    • Handle: RePEc:bpj:bejeap:v:14:y:2014:i:4:p:16:n:1
    DOI: 10.1515/bejeap-2013-0039
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    References listed on IDEAS

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    1. Chisato Yoshida, 1993. "The Global Welfare of Illegal Immigration: A Note," Indian Economic Review, Department of Economics, Delhi School of Economics, vol. 28(1), pages 111-115, January.
    2. Shuqin Sun & Makoto Tawada, 2007. "The economic effects of illegal migration under the minimum wage policy of a source country," Papers in Regional Science, Wiley Blackwell, vol. 86(2), pages 321-331, June.
    3. Paul Levine, 1999. "The welfare economics of immigration control," Journal of Population Economics, Springer;European Society for Population Economics, vol. 12(1), pages 23-43.
    4. Magnus Lofstrom & Laura Hill & Joseph Hayes, 2013. "Wage And Mobility Effects Of Legalization: Evidence From The New Immigrant Survey," Journal of Regional Science, Wiley Blackwell, vol. 53(1), pages 171-197, February.
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