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Title:Smuggling Humans: A Theory of Debt-Financed Migration PDF Logo
Authors:Friebel, Guido
Guriev, Sergei
Issue Date:2004
Series/Report no.:IZA Discussion paper series 1025
Abstract: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.
Subjects:illegal migration
wealth constraints
indentured servitude
financial contracting
JEL:N21
J61
O17
O15
Document Type:Working Paper
Appears in Collections:IZA Discussion Papers, Forschungsinstitut zur Zukunft der Arbeit (IZA)

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