Illegal Immigration in a Heterogeneous Society
This paper examines the effects of illegal immigration in a neoclassical growth model with two groups of workers, skilled and unskilled. We show that although illegal immigration is a boon to a country as a whole, there are distributional effects, whose sign is in general ambiguous. This is because all sources of income of both groups are affected and some of these changes tend to move income in opposite directions. Nevertheless, a calibration exercise shows that the wealth distribution is likely to become more unequal as the number of illegal immigrants increases. We confirm most of our calibration results analytically in a small open economy version of the basic model.
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