Government Policy under Price Uncertainty: A Source of Volatility in Illegal Immigration

Mark Guzman, Joseph Haslag and Pia Orenius
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Pia Orenius: Research Department, Federal reserve Bank of Dallas

No em-dp2013-05, Economics Discussion Papers from Department of Economics, University of Reading

Abstract: In this paper we provide an alternative explanation for why illegal immigration can exhibit substantial fluctuation. We develop a model economy in which migrants make decisions in the face of uncertain border enforcement and lump-sum transfers from the host country. The uncertainty is extrinsic in nature, a sunspot, and arises as a result of ambiguity regarding the commodity price of money. Migrants are restricted from participating in state-contingent insurance markets in the host country, whereas host country natives are not. Volatility in migration ?ows stems from two distinct sources: the tension between transfers inducing migration and enforcement discouraging it and secondly the existence of a sunspot. Finally, we examine the impact of a change in tax/transfer policies by the government on migration.

JEL-codes: D51 E62 F22 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2013-10-10
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http://www.reading.ac.uk/web/FILES/economics/emdp2013102.pdf

Related works:
Journal Article: Government policy under price uncertainty: A source of volatility in illegal immigration (2015)
Journal Article: Government policy under price uncertainty: A source of volatility in illegal immigration (2015)
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