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Government policy under price uncertainty: a source of volatility in illegal immigration

Guzman, M. G., Haslag, J. H. and Orrenius, P. M. (2015) Government policy under price uncertainty: a source of volatility in illegal immigration. Canadian Journal of Economics, 48 (3). pp. 940-962. ISSN 0008-4085

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To link to this item DOI: 10.1111/caje.12164

Abstract/Summary

In this paper we provide an alternative explanation for why illegal immigration can exhibit substantial fluctuation. We develop a model economy in which migrants make decisions in the face of uncertain border enforcement and lump-sum transfers from the host country. The uncertainty is extrinsic in nature, a sunspot, and arises as a result of ambiguity regarding the commodity price of money. Migrants are restricted from participating in state-contingent insurance markets in the host country, whereas host country natives are not. Volatility in migration flows stems from two distinct sources: the tension between transfers inducing migration and enforcement discouraging it and secondly the existence of a sunspot. Finally, we examine the impact of a change in tax/transfer policies by the government on migration.

Item Type:Article
Refereed:Yes
Divisions:Faculty of Arts, Humanities and Social Science > School of Politics, Economics and International Relations > Economics
ID Code:34222
Publisher:Wiley

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