The Global Welfare Effects of Illegal Immigration in the Absence of Capital Mobility

Abstract

The purpose of this chapter is to complement an earlier paper by Bond and Chen (1987). Our model consists of a two-country world in which the host country introduces an internal enforcement policy to catch illegal immigrants working in domestic firms. We examine the effects of this policy on the welfare of the host country, the foreign country and the world when capital is internationally immobile. Our main result is that the internal enforcement policy reduces the foreign country’s welfare and global welfare and, under certain conditions, increases the host country’s welfare.