Trade Policy and Illegal Immigration

Abstract

We develop a general equilibrium two-country model in which the home and foreigncountriestrade twofinal goodsand legalimmigrationis restricted. Inter- national trade is distorted via tariffs imposed by both countries. Foreign migrants attempt illegally entry to the home country but face a probability of detection and arrest by border patrol of the home country. The primary concern is with the inter- action between tariff policy and illegal immigration. Tariff settings affect the real wages that illegal immigrants can attract and so have an influence on the amount of illegal immigration. Conversely, the existence of illegal immigrants can influ- ence the effectiveness of changes in tariffs. Our analysis attempts to draw out the important interactions between tariff policy and illegal immigration. We establish conditions under which unilateral and bilateral tariff reforms reduce successful ille- gal immigration, and determine the welfare implications of these policy changes. We conclude that the mutual liberalization of trade does not necessarily reduce successful illegal immigration.