Illegal Migration, Wages, and Remittances: Semi-Parametric Estimation of Illegality Effects

Christian Schluter () and Jackline Wahba
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Christian Schluter: University of Southampton

No 4527, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: We consider the issue of illegal migration from Mexico to the US, and examine whether the lack of legal status causally impacts on outcomes, specifically wages and remitting behavior. These outcomes are of particular interest given the extent of legal and illegal migration, and the resulting financial flows. We formalize this question and highlight the principal empirical problem using a potential outcome framework with endogenous selection. The selection bias is captured by a control function, which is estimated non-parametrically. The framework for remitting is extended to allow for endogenous regressors (e.g. wages). We propose a new re-parametrisation of the control function, which is linear in case of a normal error structure, and test linearity. Using Mexican Migration project data, we find considerable and robust illegality effects on wages, the penalty being about 12% in the 1980s and 22% in the 1990s. For the latter period, the selection bias is not created by a normal error structure; wrongly imposing normality overestimates the illegality effect on wages by 50%, while wrongly ignoring selection leads to a 50% underestimate. In contrast to these wage penalties, legal status appears to have mixed effects on remitting behavior.

Keywords: non-parametric estimation; control functions; selection; counterfactuals; illegality effects; illegal migration; intermediate outcomes; Mexican Migration Project (search for similar items in EconPapers)
JEL-codes: J30 J40 J61 (search for similar items in EconPapers)
Pages: 39 pages
Date: 2009-10
New Economics Papers: this item is included in nep-dev, nep-ecm and nep-mig
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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