On the Macroeconomic and Welfare Effects of Illegal Immigration

Liu, Xiangbo (2009): On the Macroeconomic and Welfare Effects of Illegal Immigration. Unpublished.

Abstract

This paper investigates the macroeconomic and welfare effects of illegal immigration on the native born within a dynamic general equilibrium framework with labor market frictions. A key feature of the model is that job competition is allowed for between domestic workers and illegal immigrants. We calibrate the model to match some key statistics of the postwar U.S. economy. The model predicts that in the long run illegal immigration is a boon, but the employment opportunities of domestic workers are strongly negatively affected. The model also predicts that the level of domestic consumption has a U-shaped relationship with the share of illegal immigrants.

• Item Type: MPRA Paper
• Language: English
• Keywords: Economic Growth; Immigration; Welfare; Search; Unemployment
• Subjects: F - International Economics > F2 - International Factor Movements and International Business > F22 - International Migration; O - Economic Development, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity > O41 - One, Two, and Multisector Growth Models; J - Labor and Demographic Economics > J6 - Mobility, Unemployment, and Vacancies > J64 - Unemployment: Models, Duration, Incidence, and Job Search

References

Auerbach, A., Kotlikoff, L (1995). Macroeconomics: An integrated approach., South-Western College Publishing, Cincinnati, OH.

Blanchard, O.J., Diamond, P.A.,(1989). The Beveridge Curve. Brookings Papers on Economic Activity 1, 1-60.

Bond, E. W., Chen, T.-J., (1987). "The Welfare effects of illegal immigration," Journal of International Economics, 14, pp. 315-328.

Borjas, George J (2003). "The Labor Demand Curve Is Downward Sloping: Reexamining The Impact Of Immigration On The Labor Market," The Quarterly Journal of Economics, 118(4), pp. 1335-1374.

Borjas, George J., Grogger Jeffery, and Hanson Gordon(2007). "Immigration and African-American Employment Opportunities: The Response of Wages, Employment, and Incarceration to Labor Supply Shocks." NBER Working Paper, No.12518.

Card, David, Thomas Lemieux (2001), "Can Falling Supply Explain the Rising Return to College for Younger Men? A Cohort-Based Analysis," Quarterly Journal of Economics, CXVI pp. 705-746.

Cooley, Thomas F, Hansen, Gary D and Prescott, Edward C (1995), "Equilibrium Business Cycles with Idle Resources and Variable Capacity Utilization," Economic Theory, 6 pp. 35-49.

Cooley Thomas F, Ohanian Lee E (1999), "Postwar British Economic Growth and the Legacy of Keynes," Journal of Political Economy, 105(3), pp. 439-472.

Ethier WJ (1986). "Illegal Immigration." American Economic Review, 76(2), pp. 258-262.

Friedberg, Rachel M., Hunt, Jennifer (1995) "The Impact of Immigrants on Host Country Wages, Employment and Growth." Journal of Economics Perspectives, 9 pp. 23-44.

Gollin, Douglas, (2002). "Getting Income Shares Right," Journal of Political Economy, 110(2), pp. 458-474.

Hazari BR., Sgro PM (2003). "The Simple Analysis of Optimal Growth with Illegal Migrants." Journal of Economic Dynamics and Control, 28(1), pp. 141-151.

Hotchkiss, J. L., and Myriam. Quispe-Agnoli (2008), "The Labor Market Experience and Impact of Undocumented Workers," Working Paper 2008-7c, Federal Reserve Bank of Atlanta.

Killingsworth, M.R., (1983). Labor Supply. Cambridge University Press, Cambridge.

Lucas Jr., R.E., (1987). Models of Business Cycles. , Blackwell, Oxford.

Merz, Monika (1995). "Search in the Labor Market and the Real Business Cycle", Journal of Monetary Economics, 36 pp. 269-300.

Moy HM., Yip CK (2006). "The Simple Analytics of Optimal Growth with Illegal Migrants: A Clarification." Journal of Economic Dynamics and Control 30(12), pp. 2469-2475.24

Palivos, Theodore (2009)."Welfare Effects of Illegal Immigration", Journal of Population Economics, 22(1), pp. 131-144.

Palivos, Theodore., Chong K. Yip (2007)."Illegal Immigration in a Heterogeneous Society",Discussion Paper Series from Department of Economics, University of Macedonia.

Shi Shouyong., Wen Quan (1997). "Labor Market Search and Capital Accumulation: Some Analytical Results", Journal of Economic Dynamics and Control, 21 pp. 1747-1776.

Shi Shouyong, Wen Quan (1999). "Labor Market Search and the Dynamic Effects of Taxes and Subsidies", Journal of Monetary Economics, 43 pp. 457-495.

Siegel, J. (2002), Stocks for the Long Run, Third Edition, McGraw-Hill, New York.

United Nations (2004). World Economic and Social Survey 2004. United Nations Department of Economic and Social Affairs, E/2004/75/Rev.1/Add.1.