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Welfare effects of illegal immigration

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Abstract

This paper analyzes the welfare effect of illegal immigration on the host country within a dynamic general equilibrium framework and shows that it is positive for two reasons. First, immigrants are paid less than their marginal product and second, following an increase in immigration, domestic households find it optimal to increase their holdings of capital. It is also shown that dynamic inefficiency may arise, despite the fact that the model is of the Ramsey type. Nevertheless, the introduction of a minimum wage, which leads to job competition between domestic unskilled workers and immigrants reverses all of the above results.

Suggested Citation

  • Theodore Palivos, 2007. "Welfare effects of illegal immigration," Discussion Paper Series 2007_01, Department of Economics, University of Macedonia, revised Dec 2007.
  • Handle: RePEc:mcd:mcddps:2007_01
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    File URL: http://aphrodite.uom.gr/econwp/pdf/immigration1.pdf
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    References listed on IDEAS

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    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. Eugenia Markova & Barry Reilly, 2007. "Bulgarian Migrant Remittances and Legal Status: Some Micro-Level Evidence from Madrid," South-Eastern Europe Journal of Economics, Association of Economic Universities of South and Eastern Europe and the Black Sea Region, vol. 5(1), pages 55-69.
    3. 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.
    4. Kemnitz, Alexander & Wigger, Berthold U., 2000. "Growth and social security: the role of human capital," European Journal of Political Economy, Elsevier, vol. 16(4), pages 673-683, November.
    5. Gil S. Epstein & Odelia Heizler (Cohen), 2008. "Illegal migration, enforcement, and minimum wage," Research in Labor Economics,in: Work, Earnings and Other Aspects of the Employment Relation, volume 28, pages 197-224 Emerald Publishing Ltd.
    6. 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;European Society for Population Economics, vol. 12(1), pages 91-116.
    7. Catalina Amuedo-Dorantes & Cynthia Bansak & Susan Pozo, 2005. "On the remitting patterns of immigrants: evidence from Mexican survey data," Economic Review, Federal Reserve Bank of Atlanta, issue Q 1, pages 37-58.
    8. Ethier, Wilfred J, 1986. "Illegal Immigration," American Economic Review, American Economic Association, vol. 76(2), pages 258-262, May.
    9. Hung-Ju Chen, 2006. "International migration and economic growth: a source country perspective," Journal of Population Economics, Springer;European Society for Population Economics, vol. 19(4), pages 725-748, October.
    10. 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.
    11. Catalina Amuedo-Dorantes & Susan Pozo, 2006. "Remittances as insurance: evidence from Mexican immigrants," Journal of Population Economics, Springer;European Society for Population Economics, vol. 19(2), pages 227-254, June.
    12. Ortega, Javier, 2000. "Pareto-Improving Immigration in an Economy with Equilibrium Unemployment," Economic Journal, Royal Economic Society, vol. 110(460), pages 92-112, January.
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    Cited by:

    1. Mayr, Karin & Minter, Steffen & Krieger, Tim, 2012. "Policies on illegal immigration in a federation," Regional Science and Urban Economics, Elsevier, vol. 42(1-2), pages 153-165.
    2. repec:ura:ecregj:v:1:y:2017:i:3:p:812-826 is not listed on IDEAS
    3. Ioana Viasu, 2014. "Migrant Labor, Unemployment and Optimal Growth," Computational Methods in Social Sciences (CMSS), "Nicolae Titulescu" University of Bucharest, Faculty of Economic Sciences, vol. 2(2), pages 30-38, December.
    4. Subhayu Bandyopadhyay & Dustin Chambers & Jonathan Munemo, 2012. "Foreign aid, illegal immigration, and host country welfare," Working Papers 2012-007, Federal Reserve Bank of St. Louis.
    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. Chassamboulli, Andri & Palivos, Theodore, 2010. ""Give me your Tired, your Poor," so I can Prosper: Immigration in Search Equilibrium," MPRA Paper 32379, University Library of Munich, Germany.
    7. Andri Chassamboulli & Theodore Palivos, 2014. "A Search‐Equilibrium Approach To The Effects Of Immigration On Labor Market Outcomes," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 55, pages 111-129, February.
    8. Chassamboulli, Andri & Palivos, Theodore, 2013. "The impact of immigration on the employment and wages of native workers," Journal of Macroeconomics, Elsevier, vol. 38(PA), pages 19-34.
    9. Aleksandra Vasilyeva & Aleksandr Tarasyev, 2014. "Future Development Of Migration Processes And Labour Market In The Regions Of Russia," Economy of region, Centre for Economic Security, Institute of Economics of Ural Branch of Russian Academy of Sciences, vol. 1(4), pages 283-298.
    10. repec:bla:ecinqu:v:55:y:2017:i:3:p:1231-1264 is not listed on IDEAS
    11. Subhayu Bandyopadhyay & Dustin Chambers & Jonathan Munemo, 2014. "Special Issue: Issues in Asia. Guest Editor: Laixun Zhao," Review of Development Economics, Wiley Blackwell, vol. 18(2), pages 372-385, May.
    12. Xiangbo Liu & Theodore Palivos & Xiaomeng Zhang, 2017. "Immigration, Skill Heterogeneity, And Qualification Mismatch," Economic Inquiry, Western Economic Association International, vol. 55(3), pages 1231-1264, July.
    13. Carmelo Pierpaolo Parello, 2012. "Indeterminacy in a Dynamic Small Open Economy with International Migration," Working Papers 159, University of Rome La Sapienza, Department of Public Economics.
    14. Jesús Clemente & Gemma Larramona, 2012. "Can a legalization programme for immigrants generate conflict among natives?," Chapters,in: Migration Impact Assessment, chapter 11, pages 365-386 Edward Elgar Publishing.
    15. Liu, Xiangbo, 2010. "On the macroeconomic and welfare effects of illegal immigration," Journal of Economic Dynamics and Control, Elsevier, vol. 34(12), pages 2547-2567, December.
    16. Theodore Palivos & Chong Yip, 2010. "Illegal immigration in a heterogeneous labor market," Journal of Economics, Springer, vol. 101(1), pages 21-47, September.

    More about this item

    Keywords

    Economic Growth; Illegal Immigration;

    JEL classification:

    • F2 - International Economics - - International Factor Movements and International Business
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity

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