Immigration, integration, and the informal economy in OECD countries

Oussama Ben Atta (), Isabelle Chort and Jean-Noël Senne ()
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Oussama Ben Atta: EPEE - Centre d'Etudes des Politiques Economiques - UEVE - Université d'Évry-Val-d'Essonne - Université Paris-Saclay, TREE - Transitions Energétiques et Environnementales - UPPA - Université de Pau et des Pays de l'Adour - CNRS - Centre National de la Recherche Scientifique

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Abstract: This article assesses the impact of immigrant and asylum seeker inflows on the size of the informal sector in host countries from a macroeconomic perspective. We use two indicators of informality provided by Medina and Schneider (2019) and Elgin and Oztunali (2012) combined with migration data from the OECD International Migration Database and data on asylum seeker flows from the UNHCR for the period 1997-2017. We estimate a first-difference model, instrumenting immigrant and asylum seeker flows by their predicted values derived from the estimation of a pseudo-gravity model. Results suggest that both immigrant and asylum seeker inflows increase the size of the informal sector at destination, but the size of the effect is very small: a one percentage point increase in the stock of immigrants as a share of population leads to an increase of the informal sector as a share of GDP of 0.05-0.06 percentage points. Unsurprisingly, the effect is about four times larger for asylum seeker flows, but remains economically insignificant. We investigate several potential channels, and find that integration policies do matter. We find no impact of imported norms or institutions, but rather that the effect is larger in destination countries with a large informal sector. A larger diversity in incoming flows is associated with a smaller impact on the informal sector. Finally, we document the dynamics with a VAR model.

Keywords: migration; informal economy; asylum seekers; integration policies; shadow economy (search for similar items in EconPapers)
Date: 2022-10-25
New Economics Papers: this item is included in nep-int, nep-iue, nep-mig and nep-ure
Note: View the original document on HAL open archive server: https://univ-pau.hal.science/hal-03822494v2
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Working Paper: Immigration, integration, and the informal economy in OECD countries (2022)
Working Paper: Immigration, integration, and the informal economy in OECD countries (2022)
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