Smuggling Humans: A Theory of Debt-Financed Migration

Guido Friebel and Sergei Guriev ()

No 4305, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We introduce financial constraints in a theoretical analysis of illegal immigration. Intermediaries finance the migration costs of wealth-constrained migrants, who enter temporary servitude contracts to pay back the debt. These debt/labour contracts are more easily enforceable in the illegal than in the legal sector of the host country. Hence, when moving from the illegal to the legal sector becomes more costly because of, for instance, stricter deportation policies, fewer immigrants default on debt. This reduces the risks for intermediaries, who are then more willing to finance illegal migration. Stricter deportation policies may thus increase rather than decrease the ex ante flow of illegal migrants. We also show that stricter deportation policies worsen the skill composition of immigrants. While stricter border controls decrease overall immigration, they may also result in an increase of debt-financed migration.

Keywords: financial contracting; illegal migration; indentured servitude; wealth constraints (search for similar items in EconPapers)
JEL-codes: J61 N21 O15 O17 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-fin
Date: Written 2004-03
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Related works:
Working Paper: Smuggling Humans: A Theory of Debt-Financed Migration (2004)
Working Paper: Smuggling Humans: A Theory of Debt-Financed Migration (2005)
Journal Article: Smuggling Humans: A Theory of Debt-financed Migration (2006)
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