Illegal immigration and a heterogeneous labour force. When can quotas generate an internal conflict?

Abstract

In this paper we analyze the effects on the welfare of heterogeneous native workers in the context of the presence of legal and illegal immigrants, and where the main instrument of economic policy takes the form of entry quotas. In the framework of a model of overlapping generations, we find that these effects are not monotonous. More particularly, we note that in certain circumstances the effects on the native workers of a change in the quota are opposite in nature, depending on whether or not these workers are qualified. The key aspect of this result is, on the one hand, the effect of illegal immigration on wages and, on the other, the part of income generated by the illegal immigrants that is appropriated by the natives for managing this “informal” labour market. Keywords: Illegal immigration; entry quotas; qualification. JEL: F22, J61,J68.