Smuggling Humans: A Theory of Debt-Financed Migration

Guido Friebel () and Sergei Guriev

No w0058, Working Papers from New Economic School (NES)

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 repay the debt. These debt/labor contracts are easier to enforce 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, for instance, because of 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, ex ante, increase rather than decrease the flow of illegal migrants. Furthermore, stricter deportation policies worsen the skill composition of immigrants. While stricter border controls decrease overall immigration, they may result in an increase of debt-financed migration. We also show that there are complementarities between employer sanctions and deportation policies. We use available evidence to check the empirical consistency of the theory.

Keywords: Illegal migration; wealth constraints; indentured servitude; financial contracting (search for similar items in EconPapers)
JEL-codes: J61 K42 O17 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2002-02, Revised 2005-12
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Forthcoming in the Journal of European Economic Association

Downloads: (external link)
https://www.nes.ru/files/Preprints-resh/WP58smuggling-people.pdf (application/pdf)

Related works:
Journal Article: Smuggling Humans: A Theory of Debt-financed Migration (2006)
Working Paper: Smuggling humans: A theory of debt-financed migration (2006)
Working Paper: Smuggling Humans: A Theory of Debt-Financed Migration (2005)
Working Paper: Smuggling Humans: A Theory of Debt-Financed Migration (2004)
Working Paper: Smuggling Humans: A Theory of Debt-Financed Migration (2004)
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