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Government Policy under Price Uncertainty: A Source of Volatility in Illegal Immigration

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Listed:
  • Mark G. Guzman

    (Department of Economics, University of Reading)

  • Joseph H. Haslag

    (Department of Economics, University of Missouri)

  • Pia M. Orenius

    (Research Department, Federal reserve Bank of Dallas)

Abstract

In this paper we provide an alternative explanation for why illegal immigration can exhibit substantial fluctuation. We develop a model economy in which migrants make decisions in the face of uncertain border enforcement and lump-sum transfers from the host country. The uncertainty is extrinsic in nature, a sunspot, and arises as a result of ambiguity regarding the commodity price of money. Migrants are restricted from participating in state-contingent insurance markets in the host country, whereas host country natives are not. Volatility in migration ?ows stems from two distinct sources: the tension between transfers inducing migration and enforcement discouraging it and secondly the existence of a sunspot. Finally, we examine the impact of a change in tax/transfer policies by the government on migration.

Suggested Citation

  • Mark G. Guzman & Joseph H. Haslag & Pia M. Orenius, 2013. "Government Policy under Price Uncertainty: A Source of Volatility in Illegal Immigration," Economics Discussion Papers em-dp2013-05, Department of Economics, University of Reading.
    • Handle: RePEc:rdg:emxxdp:em-dp2013-05
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • D51 - Microeconomics - - General Equilibrium and Disequilibrium - - - Exchange and Production Economies
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration

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