Spending More is Spending Less: Policy Dilemmas on Irregular Migration
48 Pages Posted: 9 May 2012
Date Written: March 26, 2012
We study the migration policy set by a welfare maximizing government in a model where immigrant workers differ in their skills and are imperfectly matched with heterogeneous occupations. The policy ﬁxes a minimum skill level for legal migrants, and foreign workers that fall below it can only enter the country illegally. We start by analyzing under which conditions an amnesty is desirable compared to tolerating undocumented immigrants. Next, we study when it is preferable to have ex-ante lax enforcement, rather than to carry out costly enforcement. We show that three channels play an important role in this decision: an amnesty is more likely the larger are the output gains brought about byt helegalization, the less redistributive is the welfare state and the higher is the expected cost of criminal activities carried out by illegal immigrants. Importantly, we also ﬁnd that, when an amnesty is desirable, the destination country would reach an even higher welfare level investing in enforcement ex-ante. Empirical evidence based on a novel panel dataset of legalization programs carried out by a group of OECD countries between 1980-2007 broadly supports the role played by the channels identiﬁed in our theoretical model.
Keywords: Illegal immigration, Immigration Policy, Amnesties, Labor market mismatch
JEL Classification: F22, J61
Suggested Citation: Suggested Citation