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Employer Sanctions, Illegal Migration and Welfare

  • Munirul H Nabin
  • Pasquale M Sgro


Despite border enforcement and penalties for firms that hire illegal migrants, the presence of illegal migrants in most economies still persists. This paper assumes a Ricardian economy and analyzes migration of illegal unskilled workers in a model of Cournot Duopoly where firms are producing homogenous and non-traded goods, and hiring illegal migrants. A two-stage simultaneous move game is set up: In stage 1, for a given technology and vigilance level, each individual firm will decide whether to hire illegal migrants. In stage 2, each firm will choose the Cournot output level. Using this structure, we demonstrate that hiring illegal migrants is not necessarily welfare-reducing for a given industry and furthermore the presence of illegal migrants creates more employment for domestic workers.

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Paper provided by Deakin University, Faculty of Business and Law, School of Accounting, Economics and Finance in its series Economics Series with number 2010_01.

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Date of creation: 09 Feb 2010
Date of revision:
Handle: RePEc:dkn:econwp:eco_2010_01
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  1. David Card, 2005. "Is the New Immigration Really So Bad?," NBER Working Papers 11547, National Bureau of Economic Research, Inc.
  2. Jean Baldwin Grossman, 1984. "Illegal immigrants and domestic employment," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 37(2), pages 240-251, January.
  3. George J. Borjas & Lawrence F. Katz, 2007. "The Evolution of the Mexican-Born Workforce in the United States," NBER Chapters, in: Mexican Immigration to the United States, pages 13-56 National Bureau of Economic Research, Inc.
  4. Horst Entorf & Jochen Moebert, 2004. "The demand for illegal migration and market outcomes," Intereconomics: Review of European Economic Policy, Springer, vol. 39(1), pages 7-10, January.
  5. Schroeter, John R. & Azzam, Azzeddine M., 1990. "Measuring Market Power in Multi-Product Oligopolies: The U.S. Meat Industry," Staff General Research Papers 11112, Iowa State University, Department of Economics.
  6. George J. Borjas, 1994. "The Economic Benefits from Immigration," NBER Working Papers 4955, National Bureau of Economic Research, Inc.
  7. Gathmann, Christina, 2008. "Effects of enforcement on illegal markets: Evidence from migrant smuggling along the southwestern border," Journal of Public Economics, Elsevier, vol. 92(10-11), pages 1926-1941, October.
  8. Gordon H. Hanson, 2006. "Illegal Migration from Mexico to the United States," Journal of Economic Literature, American Economic Association, vol. 44(4), pages 869-924, December.
  9. Entorf, Horst, 2000. "Rational Migration Policy Should Tolerate Non-Zero Illegal Migration Flows: Lessons from Modelling the Market for Illegal Migration," IZA Discussion Papers 199, Institute for the Study of Labor (IZA).
  10. Magnac, T. & Verdier, T., 1989. "Welfare Aspects of Technological Adoption with Learning," DELTA Working Papers 89-16, DELTA (Ecole normale supérieure).
  11. Ethier, Wilfred J, 1986. "Illegal Immigration: The Host-Country Problem," American Economic Review, American Economic Association, vol. 76(1), pages 56-71, March.
  12. Gregory Clark, 1991. "Yields per acre in English agriculture, 1250-1860: evidence from labour inputs," Economic History Review, Economic History Society, vol. 44(3), pages 445-460, 08.
  13. Frank Bean & B. Lowell & Lowell Taylor, 1988. "Undocumented Mexican immigrants and the earnings of other workers in the United States," Demography, Springer, vol. 25(1), pages 35-52, February.
  14. Hatta, Tatsuo, 1977. "A Theory of Piecemeal Policy Recommendations," Review of Economic Studies, Wiley Blackwell, vol. 44(1), pages 1-21, February.
  15. Raquel Carrasco & Juan Jimeno & A. Ortega, 2008. "The effect of immigration on the labor market performance of native-born workers: some evidence for Spain," Journal of Population Economics, Springer, vol. 21(3), pages 627-648, July.
  16. Bhagwati, Jagdish N, 1982. "Directly Unproductive, Profit-seeking (DUP) Activities," Journal of Political Economy, University of Chicago Press, vol. 90(5), pages 988-1002, October.
  17. Bond, Eric W. & Chen, Tain-Jy, 1987. "The welfare effects of illegal immigration," Journal of International Economics, Elsevier, vol. 23(3-4), pages 315-328, November.
  18. Thomas J. Carter, 2005. "Undocumented Immigration and Host-Country Welfare: Competition Across Segmented Labor Markets," Journal of Regional Science, Wiley Blackwell, vol. 45(4), pages 777-795.
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