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On the Political Economy of Illegal Immigration
Ruxanda Berlinschi and Mara Squicciarini
LICOS Centre for Institutions and Economic Performance
K.U.Leuven
Work in progress, April 2011
Abstract
This paper provides an economic rationale for the presence of illegal migrants in many
developed countries. Unlike natives or legal migrants, illegal migrants can be easily hired with
informal contracts that do not respect all labour market regulations. When minimum wage
regulations are binding, informal employment of illegal migrants has no effect on natives wages,
but allows increases in production and capital revenues above the levels in which marginal
labour productivity equals the minimum wage. Natives with sufficient capital holdings will then
support immigration policies that tolerate a certain level of illegal immigration. Moreover - if
migrants are on average poorer than natives - natives’ preference for illegal rather than legal
immigration is reinforced in presence of a redistributive welfare system from which illegal
migrants are excluded.
JEL Classification : F22; D72; J61
Keywords : Political Economy, Minimum Wage, Illegal Immigration.
“The reality is that if the government were able to stop everybody at the border, there would be
no agriculture. You wouldn’t be eating asparagus.”
1
Walsh (1999)
“Illegal immigration is a persistent
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