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Abstract: Illegal Migration, Wages, and Remittances: Semi-Parametric Estimation of Illegality Effects

  • Christian Schluter

    ()

    (University of Southampton)

  • Jackline Wahba

    ()

    (University of Southampton and IZA)

Registered author(s):

    We consider the issue of illegal migration from Mexico to the US, and examine whether the lack of legal status causally impacts on outcomes, specifically wages and remitting behavior. These outcomes are of particular interest given the extent of legal and illegal migration, and the resulting financial flows. We formalize this question and highlight the principal empirical problem using a potential outcome framework with endogenous selection. The selection bias is captured by a control function, which is estimated non-parametrically. The framework for remitting is extended to allow for endogenous regressors (e.g. wages). We propose a new reparametrisation of the control function, which is linear in case of a normal error structure, and test linearity. Using Mexican Migration project data, we find considerable and robust illegality effects on wages, the penalty being about 12% in the 1980s and 22% in the 1990s. For the latter period, the selection bias is not created by a normal error structure; wrongly imposing normality overestimates the illegality effect on wages by 50%, while wrongly ignoring selection leads to a 50% underestimate. In contrast to these wage penalties, legal status appears to have mixed effects on remitting behavior.

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    File URL: http://www.norface-migration.org/publ_uploads/NDP_37_12.pdf
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    Paper provided by Norface Research Programme on Migration, Department of Economics, University College London in its series Norface Discussion Paper Series with number 2012037.

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    Date of creation: Nov 2012
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    Handle: RePEc:nor:wpaper:2012037
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    1. 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.
    2. repec:cup:cbooks:9780521785167 is not listed on IDEAS
    3. Pia M. Orrenius & Madeline Zavodny, 2001. "Self-selection among undocumented immigrants from Mexico," Working Paper 2001-1, Federal Reserve Bank of Atlanta.
    4. David Card, 2005. "Is the New Immigration Really So Bad?," NBER Working Papers 11547, National Bureau of Economic Research, Inc.
    5. repec:cup:cbooks:9780521780506 is not listed on IDEAS
    6. Rapoport, Hillel & Docquier, Frédéric, 2005. "The Economics of Migrants’ Remittances," IZA Discussion Papers 1531, Institute for the Study of Labor (IZA).
    7. Manuela Angelucci, 2012. "US Border Enforcement and the Net Flow of Mexican Illegal Migration," Economic Development and Cultural Change, University of Chicago Press, vol. 60(2), pages 311 - 357.
    8. Heckman, James J. & Navarro, Salvador, 2003. "Using Matching, Instrumental Variables and Control Functions to Estimate Economic Choice Models," IZA Discussion Papers 768, Institute for the Study of Labor (IZA).
    9. Sherrie A. Kossoudji & Deborah A. Cobb-Clark, 2002. "Coming out of the Shadows: Learning about Legal Status and Wages from the Legalized Population," Journal of Labor Economics, University of Chicago Press, vol. 20(3), pages 598-628, July.
    10. Peter Hall & J. D. Opsomer, 2005. "Theory for penalised spline regression," Biometrika, Biometrika Trust, vol. 92(1), pages 105-118, March.
    11. Gordon H. Hanson, 2006. "Illegal Migration from Mexico to the United States," NBER Working Papers 12141, National Bureau of Economic Research, Inc.
    12. Kaivan Munshi, 2003. "Networks In The Modern Economy: Mexican Migrants In The U.S. Labor Market," The Quarterly Journal of Economics, MIT Press, vol. 118(2), pages 549-599, May.
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