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Guest workers in the underground economy

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  • Djajić, Slobodan
  • Mesnard, Alice

Abstract

Guest-worker programs have been providing rapidly growing economies with millions of foreign workers over the last couple of decades. With the duration of stay strictly limited by program rules in some host countries and wages paid to guest workers often set at sub-market levels, many migrants choose to overstay and seek unauthorized employment. The model we develop examines how the wage of illegal aliens and the flow of guest workers transiting to undocumented status are affected by the rules of the program, enforcement measures of the host country, and market conditions facing migrants at home and abroad. Lengthening the duration of official work permits is found to decrease the stock of undocumented workers, but it has an ambiguous effect on their wage. An expansion in the allowed inflow of documented guest workers has a negative impact on the wage of undocumented workers and an ambiguous effect on their stock.

Suggested Citation

  • Djajić, Slobodan & Mesnard, Alice, 2015. "Guest workers in the underground economy," Labour Economics, Elsevier, vol. 35(C), pages 53-62.
    • Handle: RePEc:eee:labeco:v:35:y:2015:i:c:p:53-62
    DOI: 10.1016/j.labeco.2015.04.002
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    References listed on IDEAS

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    Cited by:

    1. Pierre Brochu & Till Gross & Christopher Worswick, 2020. "Temporary foreign workers and firms: Theory and Canadian evidence," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 53(3), pages 871-915, August.
    2. Carmen Camacho & Fabio Mariani & Luca Pensieroso, 2017. "Illegal immigration and the shadow economy," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 24(6), pages 1050-1080, December.
    3. Alexandra Vinogradova, 2016. "Illegal immigration, deportation policy, and the optimal timing of return," Journal of Population Economics, Springer;European Society for Population Economics, vol. 29(3), pages 781-816, July.
    4. Slobodan Djajić & Alexandra Vinogradova, 2019. "Immigration Policies and the Choice between Documented and Undocumented Migration," Economica, London School of Economics and Political Science, vol. 86(341), pages 201-228, January.

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    More about this item

    Keywords

    Temporary migration; Undocumented workers; Underground economy;
    All these keywords.

    JEL classification:

    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration

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