Documenting the Undocumented: The Impact of Employment Verification Mandates on Government Borrowing Costs
Northeastern U. D’Amore-McKim School of Business Research Paper No. 5003912
HKU Jockey Club Enterprise Sustainability Global Research Institute Paper No. 2024/017
47 Pages Posted: 19 Dec 2024 Last revised: 7 Apr 2025
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
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