Fiscal Revenues and Commitment in Immigration Amnesties

Immigration amnesties aim at reducing the size of the informal sector and identifying employers of undocumented workers. However, potential fiscal gains are also important: tax revenues are crucial in all kinds of amnesties. Nevertheless, over the last thirty years an average of 24% of all applications have been rejected. It remains an open question as to why governments accept this loss of fiscal base. We argue that applying for amnesty is basically self-incrimination, and that immigration-averse governments have an incentive to use applications as a means to identify and expel illegal workers. In equilibrium only applicants with the highest income are granted amnesty, while the poorest immigrants do not apply, and fiscal revenues remain sub-optimal. We show that electoral accountability can solve the commitment problem. However, the large number of rejections suggests that the strict voter-coordination required by this mechanism is hard to obtain in practice. Therefore immigration amnesties seem doomed to inefficiency.