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Illegal Immigration and the Shadow Economy

Listed author(s):
  • Carmen Camacho

    ()

    (CNRS and Paris 1, Panthéon-Sorbonne)

  • Fabio Mariani

    ()

    (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES) and IZA, Bonn)

  • Luca Pensieroso

    ()

    (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES))

We build a general equilibrium model in which both illegal immigration and the size of the informal sector are endogenously determined and interact in a non-trivial way. We show that policy measures such as tax reduction and detection of informal activities can be used as substitutes for border enforcement, in order to contrast illegal immigration. In our framework, a welfare-maximising Government will never choose to drive illegal immigration to zero, but will set the tax rate to a lower value if it includes illegal immigration in its objective function.

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File URL: http://sites.uclouvain.be/econ/DP/IRES/2015014.pdf
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Paper provided by Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES) in its series Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) with number 2015014.

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Length: 31
Date of creation: 29 Jun 2015
Handle: RePEc:ctl:louvir:2015014
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