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Illegal Immigration and the Shadow Economy

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

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Paper provided by Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne in its series Documents de travail du Centre d'Economie de la Sorbonne with number 15055.

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Length: 32 pages
Date of creation: Jun 2015
Handle: RePEc:mse:cesdoc:15055
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