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Welfare effects of illegal immigration

  • Theodore Palivos


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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Article provided by Springer in its journal Journal of Population Economics.

Volume (Year): 22 (2009)
Issue (Month): 1 (January)
Pages: 131-144

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Handle: RePEc:spr:jopoec:v:22:y:2009:i:1:p:131-144
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  1. Kemnitz, Alexander & Wigger, Berthold U., 2000. "Growth and social security: the role of human capital," European Journal of Political Economy, Elsevier, vol. 16(4), pages 673-683, November.
  2. 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.
  3. Woodland, Alan D. & Yoshida, Chisato, 2006. "Risk preference, immigration policy and illegal immigration," Journal of Development Economics, Elsevier, vol. 81(2), pages 500-513, December.
  4. Ethier, Wilfred J, 1986. "Illegal Immigration," American Economic Review, American Economic Association, vol. 76(2), pages 258-62, May.
  5. Hung-Ju Chen, 2006. "International migration and economic growth: a source country perspective," Journal of Population Economics, Springer, vol. 19(4), pages 725-748, October.
  6. Ortega, Javier, 2000. "Pareto-Improving Immigration in an Economy with Equilibrium Unemployment," Economic Journal, Royal Economic Society, vol. 110(460), pages 92-112, January.
  7. Catalina Amuedo-Dorantes & Cynthia Bansak & Susan Pozo, 2005. "On the remitting patterns of immigrants: evidence from Mexican survey data," Economic Review, Federal Reserve Bank of Atlanta, issue Q 1, pages 37-58.
  8. Catalina Amuedo-Dorantes & Susan Pozo, 2006. "Remittances as insurance: evidence from Mexican immigrants," Journal of Population Economics, Springer, vol. 19(2), pages 227-254, June.
  9. 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, vol. 12(1), pages 91-116.
  10. Hazari, Bharat R. & Sgro, Pasquale M., 2003. "The simple analytics of optimal growth with illegal migrants," Journal of Economic Dynamics and Control, Elsevier, vol. 28(1), pages 141-151, October.
  11. 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, vol. 30(12), pages 2469-2475, December.
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