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Illegal Immigration in a Heterogeneous Society

  • Theodore Palivos
  • Chong K. Yip

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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Paper provided by Chinese University of Hong Kong, Department of Economics in its series Departmental Working Papers with number _188.

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Date of creation: Sep 2007
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Handle: RePEc:chk:cuhked:_188
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  1. Chatterjee, S. & Ravikumar, B., 1997. "Minimum Consumption Requirements: Theoretical and Quantitative Implications for Growth and Distribution," Working Papers 97-15, University of Iowa, Department of Economics.
  2. Ethier, Wilfred J, 1986. "Illegal Immigration," American Economic Review, American Economic Association, vol. 76(2), pages 258-62, May.
  3. Stiglitz, Joseph E, 1969. "Distribution of Income and Wealth among Individuals," Econometrica, Econometric Society, vol. 37(3), pages 382-97, July.
  4. 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.
  5. Gang, Ira N & Rivera-Batiz, Francisco L, 1994. "Labor Market Effects of Immigration in the United States and Europe: Substitution vs. Complementarity," Journal of Population Economics, Springer, vol. 7(2), pages 157-75.
  6. Hazari, Bharat R & Sgro, Pasquale M, 2000. "Illegal Migration, Border Enforcement, and Growth," Review of Development Economics, Wiley Blackwell, vol. 4(3), pages 258-67, October.
  7. 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.
  8. Djajic, Slobodan, 1987. "Illegal aliens, unemployment and immigration policy," Journal of Development Economics, Elsevier, vol. 25(1), pages 235-249, February.
  9. Chatterjee, Satyajit, 1994. "Transitional dynamics and the distribution of wealth in a neoclassical growth model," Journal of Public Economics, Elsevier, vol. 54(1), pages 97-119, May.
  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. Kenji Kondoh, 2004. "International immigration and economic welfare in an efficiency wage model: The co-existence case of both legal and illegal foreign workers," Pacific Economic Review, Wiley Blackwell, vol. 9(1), pages 1-12, 02.
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