Smuggling Humans: A Theory of Debt-Financed Migration

Arbeitspapier

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.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: IZA Discussion Papers ; No. 1025

Classification and Topics

• Classification: Wirtschaft ; Economic History: Financial Markets and Institutions: U.S.; Canada: Pre-1913 ; Geographic Labor Mobility; Immigrant Workers ; Formal and Informal Sectors; Shadow Economy; Institutional Arrangements ; Economic Development: Human Resources; Human Development; Income Distribution; Migration
• Subject: illegal migration ; wealth constraints ; indentured servitude ; financial contracting ; Illegale Einwanderung ; Private Verschuldung ; Verschuldungsrestriktion ; Arbeitsvertrag ; Migrationspolitik ; Theorie

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Friebel, Guido ; Guriev, Sergei
• Event: Veröffentlichung
• (who): Institute for the Study of Labor (IZA)
• (where): Bonn
• (when): 2004

Further information

• Handle: http://hdl.handle.net/10419/20260
• Last update: 10.03.2025, 11:44 AM CET