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Dealing with Illegal Immigration: the Role of Informality, Taxation and Trade

Author

Listed:
  • Carmen Camacho

    () (PARIS SCHOOL OF ECONOMICS and CNRS)

  • Fabio Mariani

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

  • Luca Pensieroso

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

Abstract

We develop a two-good, three-sector model of a small open economy with illegal immigration and both formal and informal production. In this framework, we explore the consequences of fiscal policy and trade openness for illegal immigration and the shadow economy. We find that (i) the effect of trade openness on illegal immigration crucially depends on the degree of substitutability between native and illegal labor in the informal sector, (ii) the reach of fiscal policy goes beyond its traditional domain: fiscal instruments can be effectively used as immigration policy tools.

Suggested Citation

  • Carmen Camacho & Fabio Mariani & Luca Pensieroso, 2018. "Dealing with Illegal Immigration: the Role of Informality, Taxation and Trade," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2018007, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
  • Handle: RePEc:ctl:louvir:2018007
    as

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    File URL: https://sites.uclouvain.be/econ/DP/IRES/2018007.pdf
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    References listed on IDEAS

    as
    1. 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.
    2. Djajic, Slobodan, 1997. "Illegal Immigration and Resource Allocation," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 38(1), pages 97-117, February.
    3. Peri, Giovanni, 2011. "Rethinking the area approach: Immigrants and the labor market in California," Journal of International Economics, Elsevier, vol. 84(1), pages 1-14, May.
    4. Carmen Camacho & Fabio Mariani & Luca Pensieroso, 2017. "Illegal immigration and the shadow economy," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 24(6), pages 1050-1080, December.
    5. Andri Chassambouli & Giovanni Peri, 2015. "The Labor Market Effects of Reducing the Number of Illegal Immigrants," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 18(4), pages 792-821, October.
    6. repec:fip:fedreb:00060 is not listed on IDEAS
    7. Hillman, Arye L. & Weiss, Avi, 1999. "A theory of permissible illegal immigration," European Journal of Political Economy, Elsevier, vol. 15(4), pages 585-604, November.
    8. Friedrich Schneider & Andreas Buehn & Claudio E. Montenegro, 2011. "Shadow Economies All Over the World: New Estimates for 162 Countries from 1999 to 2007," Chapters,in: Handbook on the Shadow Economy, chapter 1 Edward Elgar Publishing.
    9. Wei, Xuan & Guan, Zhengfei & Onel, Gulcan & Roka, Fritz, 2016. "Imperfect Substitution between Immigrant and Native Farm Workers in the United States," 2016 Annual Meeting, July 31-August 2, Boston, Massachusetts 235958, Agricultural and Applied Economics Association.
    10. Andri Chassambouli & Giovanni Peri, 2015. "The Labor Market Effects of Reducing the Number of Illegal Immigrants," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 18(4), pages 792-821, October.
    11. Dabla-Norris, Era & Gradstein, Mark & Inchauste, Gabriela, 2008. "What causes firms to hide output? The determinants of informality," Journal of Development Economics, Elsevier, vol. 85(1-2), pages 1-27, February.
    12. Frédéric Docquier & Çağlar Ozden & Giovanni Peri, 2016. "The Labour Market Effects Of Immigration And Emigration In Oecd Countries," World Scientific Book Chapters,in: The Economics of International Migration, chapter 6, pages 187-226 World Scientific Publishing Co. Pte. Ltd..
    13. Emanuele Bracco & Luisanna Onnis, 2015. "Immigration, Amnesties and the Shadow Economy," Carlo Alberto Notebooks 418, Collegio Carlo Alberto.
    14. Ozden,Caglar & Wagner,Mathis Christoph & Ozden,Caglar & Wagner,Mathis Christoph, 2014. "Immigrant versus natives ? displacement and job creation," Policy Research Working Paper Series 6900, The World Bank.
    15. 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.
    16. Ihrig, Jane & Moe, Karine S., 2004. "Lurking in the shadows: the informal sector and government policy," Journal of Development Economics, Elsevier, vol. 73(2), pages 541-557, April.
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    Citations

    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Gli immigrati irregolari? Calano se si riduce il sommerso
      by Luca Pensieroso e Fabio Mariani in La Voce on 2019-02-08 09:58:21

    More about this item

    Keywords

    Illegal immigration; Informal sector; Shadow economy; Taxation; Immigration policy; Globalisation; Open economy;

    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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