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Guest Workers in the Underground Economy

Guest-worker programs have been providing rapidly growing economies with millions of temporary foreign workers over the last couple of decades. With the duration of stay strictly limited by program rules in most of the host countries and wages paid to guest workers often set at sub-market levels, many of the migrants choose to overstay and seek employment in the underground economy. This paper develops a general-equilibrium model that relates the flow of guest workers transiting to the underground economy to the rules of the program, enforcement measures of the host country and market conditions facing migrants at home and abroad.

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File URL: http://repec.graduateinstitute.ch/pdfs/Working_papers/HEIDWP15-2013.pdf
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Paper provided by Economics Section, The Graduate Institute of International Studies in its series IHEID Working Papers with number 15-2013.

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Length: 39 pages
Date of creation: 19 Dec 2013
Date of revision:
Handle: RePEc:gii:giihei:heidwp15-2013
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  1. 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.
  2. Guido Friebel & Sergei Guriev, 2006. "Smuggling Humans: A Theory of Debt-financed Migration," Journal of the European Economic Association, MIT Press, vol. 4(6), pages 1085-1111, December.
  3. Slobodan Djajić, 2013. "Some Essentials Of A Workable Guest‐Worker Program," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 54(2), pages 739-766, 05.
  4. Francisco L. Rivera-Batiz, 1999. "Undocumented workers in the labor market: An analysis of the earnings of legal and illegal Mexican immigrants in the United States," Journal of Population Economics, Springer, vol. 12(1), pages 91-116.
  5. Slobodan Djajic & Michael S. Michael, 2011. "Guest Worker Programs: A Theoretical Analysis of Welfare of the Host and Source Countries," University of Cyprus Working Papers in Economics 05-2011, University of Cyprus Department of Economics.
  6. 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.
  7. Kossoudji, S.A. & Cobb-Clark, D.A., 1996. "Coming Out of the Shadows: Learning About Legal Status and Wages from the Legalized Population," CEPR Discussion Papers 347, Centre for Economic Policy Research, Research School of Economics, Australian National University.
  8. 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.
  9. Ethier, Wilfred J, 1986. "Illegal Immigration: The Host-Country Problem," American Economic Review, American Economic Association, vol. 76(1), pages 56-71, March.
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