Immigration and the Informal Labor Market

25 Pages Posted: 4 Jan 2014

See all articles by Mariano Bosch

Mariano Bosch

London School of Economics & Political Science (LSE)

Lidia Farré

Spanish Council for Scientific Research (CSIC) - Institute for Economic Analysis; Universidad de Alicante

Abstract

This paper investigates the relationship between immigration and the size of the informal or underground economy. Using regional variation for the Spanish provinces we find that the massive immigration wave between 2000 and 2009 is highly correlated to the share of unregistered employment, a proxy for the size of the underground or informal labor market. We estimate that a 10 percentage points increase in the share of immigrants in a region generates between a 3 and 8 percentage points increase in unregistered employment. We also find that the controversial regularization of illegal aliens conducted in 2005 substantially reduced the number of illegal workers but did not affect the relationship between immigration and informality.

Keywords: immigration, informal economy, amnesty

JEL Classification: J61, O17

Suggested Citation

Bosch, Mariano and Farré, Lidia, Immigration and the Informal Labor Market. IZA Discussion Paper No. 7843. Available at SSRN: https://ssrn.com/abstract=2374624

Mariano Bosch (Contact Author)

London School of Economics & Political Science (LSE) ( email )

Houghton Street
London, WC2A 2AE
United Kingdom

Lidia Farré

Spanish Council for Scientific Research (CSIC) - Institute for Economic Analysis ( email )

UAB Campus
E-08193 Bellaterra
Spain

Universidad de Alicante ( email )

Campus de San Vicente
Carretera San Vicente del Raspeig
San Vicente del Raspeig, Alicante 03690
Spain

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