The Role of Risk Preference in Immigration and Minimum Wage Policies

Wang Yulian () and Hongfei Zhu ()
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Wang Yulian: School of Business, Nanjing University, Nanjing, Jiangsu, China School of International Education, Inner Mongolia Finance and Economics University, Hohhot, Inner Mongolia, China

The B.E. Journal of Economic Analysis & Policy, 2014, vol. 14, issue 4, 1709-1724

Abstract: This paper examines the effects of two enforcement policies and a minimum wage policy in controlling illegal immigration and improving welfare when capital is immobile. The model highlights the importance of the role of risk preference by considering various attitudes to risk held by illegal immigrants and host firms. It is shown that the effect of internal enforcement on the wage rate in host firms depends on the attitude to risk of illegal immigrants and host firms. It is also shown that the impacts of the minimum wage legislation differ according to risk preference and the degree of labor employment elasticity to the source wage. Moreover, attitude to risk is shown to be important in determining the effectiveness of policies on welfare.

Keywords: illegal migration; immigration policy; risk preference (search for similar items in EconPapers)
Date: 2014
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DOI: 10.1515/bejeap-2013-0039

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