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Illegal Immigration and the Shadow Economy

Author

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  • 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))

Abstract

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.

Suggested Citation

  • Carmen Camacho & Fabio Mariani & Luca Pensieroso, 2015. "Illegal Immigration and the Shadow Economy," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2015014, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
  • Handle: RePEc:ctl:louvir:2015014
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    Cited by:

    1. Orrenius, Pia M. & Zavodny, Madeline, 2016. "Irregular immigration in the European Union," Working Papers 1603, Federal Reserve Bank of Dallas.

    More about this item

    Keywords

    Illegal immigration; Clandestine workers; Informal sector; Shadow economy; Black market; Taxation; Immigration policy;

    JEL classification:

    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration
    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers

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