Documenting the Undocumented: The Impact of Employment Verification Mandates on Government Borrowing Costs

47 Pages Posted: 19 Dec 2024 Last revised: 7 Apr 2025

See all articles by Lei Li

Lei Li

Hong Kong Polytechnic University

Liwei Weng

Northeastern University - Accounting Group

Lixin (Nancy) Su

The Hong Kong Polytechnic University - School of Accounting and Finance

Cheng (Colin) Zeng

Hong Kong Polytechnic University

Date Written: January 08, 2024

Abstract

We examine how undocumented workers affect municipal bond markets. Exploiting the staggered adoption of E-Verify laws, which restrict hiring unauthorized workers, we find that E-Verify adoption significantly reduces municipal bond spreads—especially in states with larger undocumented populations, stricter enforcement, and greater anti-immigrant sentiment. This effect is weaker in states more economically reliant on undocumented labor. When investigating the potential channels of this effect, we find while E-Verify laws lower tax revenues, they also reduce spending on education and social welfare, leading to smaller fiscal deficits. Our findings highlight the fiscal and financial market consequences of immigration policy.

Keywords: Undocumented Immigrants, E-Verify, Municipal Bonds, Labor Supply, Debt Market

Suggested Citation

Li, Lei and Weng, Liwei and Su, Lixin (Nancy) and Zeng, Cheng, Documenting the Undocumented: The Impact of Employment Verification Mandates on Government Borrowing Costs (January 08, 2024). Northeastern U. D’Amore-McKim School of Business Research Paper No. 5003912, HKU Jockey Club Enterprise Sustainability Global Research Institute Paper No. 2024/017, Available at SSRN: https://ssrn.com/abstract=5003912 or http://dx.doi.org/10.2139/ssrn.5003912

Lei Li

Hong Kong Polytechnic University

Liwei Weng (Contact Author)

Northeastern University - Accounting Group ( email )

360 Huntington Ave.
Boston, MA 02115
United States

Lixin (Nancy) Su

The Hong Kong Polytechnic University - School of Accounting and Finance ( email )

M730, Li Ka Shing Tower
Hung Hom, Kowloon, Kowloon
Hong Kong
852-2766-7772 (Phone)
852-2330-9845 (Fax)

Cheng Zeng

Hong Kong Polytechnic University ( email )

11 Yuk Choi Rd
Hung Hom
Hong Kong

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