Smuggling Humans: A Theory of Debt-Financed Migration

Guido Friebel () and Sergei Guriev

No 1025, IZA Discussion Papers from Institute of Labor Economics (IZA)

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/labor 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, 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 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; wealth constraints; indentured servitude (search for similar items in EconPapers)
JEL-codes: J61 N21 O15 O17 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2004-02
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)

Published - published in: Journal of the European Economic Association, 2006, 4 (6), 1085-1111

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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 (2005)
Working Paper: Smuggling Humans: A Theory of Debt-Financed Migration (2004)
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