The Optimal Enforcement of a Finance-Constrained Immigration Law

Abstract

We extend the Bucci and Tenorio (1996) model of illegal immigration by constructing a two-country, one-good, two-factor model, and analyze political issues not considered in their work. We consider the case where capital is immobile between the two countries, as well as the case in which capital is mobile between them. Our main result is that the host country’s government can, under some circumstances, optimally enforce employer sanctions in order to maximize the host country’s welfare under both capital mobility and immobility.

The chapter was first published in Open Economies Review 15, 57–62, 2004.