ILLEGAL MIGRANTS, TOURISM AND WELFARE: A TRADE THEORETIC APPROACH

Abstract.  Many countries receive illegal migrants but are reluctant to accept them due to possible negative externalities. We provide a rationale for not policing illegal migration by linking it to the tourism industry. By paying illegal migrants less than local workers, the relative price of the non-traded goods is shown to be lower than it would be in the absence of such workers. An expansion in tourist trade, under certain intensity conditions, necessarily raises resident welfare and employment. This tourist boom necessarily lowers the welfare of the illegal migrants. It is established that an increase in tourism increases the supply of illegal migrants.     

Illegal Migration, Border Enforcement, and Growth

This paper analyzes the economic consequences of illegal migrants in the context of a model of trade and growth. In the model, capital and domestic labor are mobile sectors while illegal migrants are sector-specific. These assumptions give rise to a production possibility curve (with migrants) that lies partially inside the zero migration production possibility frontier. It is this feature of the model which generates ambiguous results regarding the relation betweendomestic welfare, illegal migrants, and enforcement. The steady-state growth path with migrants may lie above or below the balanced growth path without migrants.     

Migrants’ well-being during the global financial crisis: Economic and social predictors

This paper investigates the economic and social predictors affecting the well-being of temporary migrants before, during and after the financial crisis. Exploiting unique panel data which cover migration spells from Tajikistan to Russia between 2001 and 2011, we find that migrants earn less but stay longer in the destination during the crisis; at the same time, they become more exposed to illegal work relations, harassment and deportation through the Russian authorities. The overall income loss can be attributed to wage cuts and to rising illegal employment that is generally poorly paid. Despite the similarities in the demographics and jobs of migrant workers, we find substantial heterogeneity in how the financial crisis affects their well-being. Migrants who experience wage losses during the crisis rationally stop migrating.     

Work Effort, Moderation in Expulsion, and Illegal Migration

Illegal migrants supply a valuable productive input: effort. But their status as illegals means that these migrants face a strictly positive probability of expulsion. A return to their country of origin entails reduced earnings when the wage at origin is lower than the wage at destination. This prospect induces illegal migrants to exert more work effort than comparable workers who face no such prospect. The lower the probable, alternative earnings, the harsher the penalty that illegal migrants will be subjected to upon their return, for a given probability of expulsion, and the higher the level of effort they will exert at destination. While the home‐country wage that awaits the illegal migrants upon their return is exogenous to the host country, the probability of their return is not. Given the home‐country wage, a higher probability of expulsion will induce illegal migrants to supply more effort. Hence, different combinations of probabilities of expulsion and home‐country wages yield the same level of effort. Thus, variation in the extent to which receiving countries undertake measures aimed at apprehending and expelling illegal migrants can be attributed not to characteristics of the illegal migrants themselves but to a feature that pertains to the illegal migrants’ country of origin.     

Migration,self‐selection and income distributions

Self‐selection in rural–urban migration is examined using three datasets from rural and urban China in 2002. We construct a migrant sample including both migrants who converted their hukou status from rural to urban (permanent migrants) and those who did not (temporary migrants). We find a strong positive selection for permanent migrants, but the selection for temporary migrants is ambiguous. We reach these conclusions by comparing migrants' counterfactual wage densities, assuming they are paid as rural local workers, to actual wage densities of rural local workers. Our results imply that permanent migration has negative effects on rural human capital accumulation and income levels.     

Intentions to Return of Clandestine Migrants: Comment

We take issue with the reasoning of Coniglio et al. ( 2009 ) that whereas better‐skilled illegal migrants will prefer to return‐migrate, lower‐skilled illegal migrants will not. We argue that under asymmetric information, all the illegal migrants are initially paid a wage based on the average productivity of the group of illegal migrants. The better‐skilled illegal migrants thus face two “taxes:” being paid less than if they were legal, and being averaged down. Therefore, better‐skilled illegal migrants can be expected to expend more effort to become legal than lower‐skilled illegal migrants. And once legalized, there is no reason for the better‐skilled illegal migrants to want to return to their country of origin more than the lower‐skilled illegal migrants. Thus, it is the lower‐skilled illegal migrants that are likely to dominate the return migration flow. We argue that in other respects too, the model of Coniglio et al. is not based on reasonable assumptions, and that even under the postulated assumptions, the model suffers from several inconsistencies. In particular, when the rate of return to savings is an increasing function of skill level, we would expect there to be few better‐skilled individuals among illegal migrants in the first place. Also, an obvious distinction between savers and borrowers is ignored.     

The Global Economic Crisis and Migrant Workers: The Case of the Construction Sector in Europe

This paper examines the employment response of native and migrant workers over the business cycle in the construction sectors of European countries between 2008 and 2011. Using a dynamic model (Generalized Method of Moments), which accounts for ‘intergroup substitutability’, we observe that differences in the cyclical employment patterns of migrants and natives in the construction sector may be due to a potential selection of EU and non-EU migrants who are disproportionately prone to cyclical fluctuations in temporary jobs or a higher turnover rate.     

The effect of temporary help jobs on employment volatility

This study investigates the impact of temporary agency employment on employment volatility outside the sector. Making use of econometric volatility models, we find that enhancing numerical flexibility by temporary agency employment decreases employment volatility of incumbent workers. However, not all subgroups are benefitting equally. While prime‐age permanent workers gain considerably from higher flexibility, young workers, migrants and low‐skilled workers not only are overrepresented among the temps but also do not gain when employed outside the sector.     

SOME ESSENTIALS OF A WORKABLE GUEST‐WORKER PROGRAM*

A guest‐worker program provides an appealing way of addressing labor shortages in an advanced country. It requires, however, that foreign workers are willing to return home when their work permit expires. I examine how immigration policies, enforcement measures, and opportunities available in various markets at home and abroad affect the behavior of program participants. Welfare of a migrant who obeys the rules of the program is compared with that of workers who choose other options in order to define the conditions under which temporary migration is attractive to potential migrants and at the same time consistent with voluntary return.     

International immigration and economic welfare in an efficiency wage model: The co-existence case of both legal and illegal foreign workers

Abstract. In the developed countries some native workers are unemployed while there exist illegal unskilled (legal skilled) foreign workers who are complementary to (substitutable for) natives and their wages are usually lower than (equal to) that of natives. Reflecting this situation, we introduce two types of immigrant in an efficiency wage model. It is shown that domestic government should exclude illegal foreign workers but welcome legal ones if the total number of illegal immigrants is small enough and well controlled. On the other hand, legal immigration should be restricted if the flood of illegal immigration is out of control.     

Terms-of-Trade Shocks, Labor-Market Adjustment, and Safeguard Measures

This paper explores a simple model of labor-market adjustment where intersectoral transfer in response to terms-of-trade shocks involves both sector-specific skill acquisition and workplace disruption. Externalities arise because the marginal migrant does not consider the congestion costs imposed on intramarginal migrants or the disruption costs imposed on the incumbent workers in both sectors. While these externalities give rise to a case for temporary adjustment assistance, the analysis does not support the use of trade measures such as tariffs.     

Congestion and Optimal Immigration Policy

This paper presents a model to explain the stylized fact that many countries have a low ratio of migrants in their population while some countries have a high ratio of migrants. Immigration improves the income of the domestic residents, but migrants also increase the congestion of public services. If migrants are unskilled and therefore pay low taxes, and the government does not limit access to these services, then the welfare of the domestic residents decreases with the number of migrants. Visa auctions can lower the cost of immigration control and substitute legal migrants for illegal migrants. If the government decides to limit the access of migrants to public services, immigration control becomes unnecessary and the optimal number of migrants can be very large.     

Temporary migrants and gender housework division among left-behind household members

We examine whether Vietnamese migrant workers induce a shift in gender roles in housework division among the household members left behind. Using two waves of the Vietnamese Household Living Standard Survey (2006–2008), we apply the first-difference method and estimate a simple household fixed effects model with instrumental variables for robustness checking. We find that temporary female migrants are associated with a higher probability of undertaking housework by male members left behind and there is a reduction in the gender gap in terms of time spent on chores. However, we find little evidence for a similar reduction in the gender gap when the household size is altered for other reasons.     

Illegal immigration in the presence of labor unions

"This paper develops a general equilibrium framework of a two-sector economy which incorporates illegal immigration in the presence of labor unions. It demonstrates that stricter enforcement of immigration laws, by reducing the demand for or supply of illegal aliens, benefits all legal workers in the economy. The model is used to evaluate the impact of these policy changes on national income. Results indicate that national income does not necessarily fall when immigration controls are tightened. The existence of a union mitigates the negative welfare impact of a reduction in the number of illegal immigrants."     

A Model of Smuggling and Trafficking of Illegal Immigrants with a Host Country Policy

This paper deals with illegal immigration via two distinct activities—smuggling and trafficking of workers. A destination–source model determines economic pay‐offs and a standard labor market policy works as a deterrent. Tax paid by legal unskilled workers at the destination is determined endogenously and it finances inland monitoring against illegal immigration, holding the border patrol at a given level. The tax also finances unemployment benefit to legal workers at the destination. The number of immigrant smugglers and traffickers is also determined endogenously along with employer penalty and market wage for illegal immigrants. Higher unemployment benefits may reduce illegal wages, raise traffickers’ rent and reduce flow of illegal immigrants from the source countries.     

International Factor Mobility,Wages and Prices

This paper analyzes the joint influence of migration inflows and outward foreign direct investment (FDI) on wage bargaining. Labor migration and offshoring supported by FDI affect wage deals by changing the outside options of workers and firms. Unemployed workers may find alternative jobs either in the legal or in the illegal labor markets. Wages in this latter case are highly affected by migrants crowding this segment more than any other market. Firms may have the option of moving production partly or entirely to foreign low‐cost countries. A wage curve is designed theoretically, reflecting cross‐border labor and capital mobility, and estimated on panel data for 13 European countries over the period 1995–2013. The theoretical predictions of a joint negative effect on wages of FDI outflows and labor migration inflows are confirmed with some novel results.     

Effects of enforcement on illegal markets: Evidence from migrant smuggling along the southwestern border

The paper analyzes the effects of tighter border control on the illegal crossing market between Mexico and the United States. Combining panel data on illegal migrants with enforcement statistics, the effects of enforcement are found to be moderate: prices of border smugglers (‘coyotes’) increased by only 17%, while the demand for smugglers has remained unchanged. Enforcement has however shifted illegal migrants to remote crossing places. Border crossing is now more time-intensive with higher prices for coyotes and risk of death. This geographic substitution raised migration costs by $140, more than twice the effect of enforcement on smuggling prices.     

Foreign workers and productivity in an emerging economy: The case of Malaysia

Many developed and developing countries are experiencing large and growing levels of international migration of labor. However, the large majority of research on the economic impact of inflows of migrant workers on host economies focuses exclusively on developed countries. In this paper, we address this gap in the literature by examining migrant‐induced productivity effects in the emerging economy of Malaysia. Importantly, the Malaysian case is typical for many Asian economies where, next to high skilled foreign workers, large numbers of migrants consist of low skilled workers that are employed in host economies on a temporary basis. Using detailed industry level data for the period 2005 to 2009, we find that both high skilled and low skilled foreign workers generate positive productivity effects in Malaysian manufacturing industries. Furthermore, our results identify a strong presence of industry heterogeneity, as the effects of foreign workers, in general, and low skilled foreign workers, in particular, are pronounced in labor and assembly intensive modern industries with a strong export focus. This indicates the importance of foreign workers for the contemporary international competitiveness of the Malaysian manufacturing sector. As such, our findings provide important new input to the debate on the role of low skilled foreign workers in processes of development of the Malaysian economy.     

Relative concerns of rural-to-urban migrants in China

As their environment changes, migrants constitute an interesting group to study the effect of relative income on subjective well-being. This paper focuses on the huge population of rural-to-urban migrants in China. Using a novel dataset, we find that the well-being of migrants depends on several reference groups: it is negatively affected by the income of other migrants and workers of home regions; in contrast, we identify a positive, ‘signal’ effect vis-à-vis urban workers: larger urban incomes indicate higher income prospects for the migrants. These effects are particularly strong for migrants who wish to settle permanently, decline with years since migrations and change with other characteristics including work conditions and community ties.     

Investment opportunities in the source country and temporary migration

Abstract This paper examines how attractive investment opportunities available to temporary migrants at home affect their saving behaviour and the optimal duration of stay abroad. The model predicts an inverse U‐shaped relationship between migration duration and the expected rate of return on repatriated savings. A higher rate provides an incentive to go back earlier and consume less abroad, while it can also trigger emigration aimed at generating the savings required for investment after return. The paper illustrates how the behaviour of temporary migrants reflects the interaction between their preferences and the opportunities available in labour and capital markets of both countries.