Illegal Migration, Border Enforcement, and Growth Bharat R. Hazari and Pasquale M. Sgro* Abstract This paper analyzes the economic consequences of illegal migrants in the context of a model of trade and growth. In the model, capital and domestic labor are mobile sectors while illegal migrants are sector-specific. These assumptions give rise to a production possibility curve (with migrants) that lies partially inside the zero migration production possibility frontier. It is this feature of the model which generates ambiguous results regarding the relation between domestic welfare, illegal migrants, and enforce- ment. The steady-state growth path with migrants may lie above or below the balanced growth path without migrants. 1. Introduction Several countries have been importers of legal and/or illegal migrants for most of this century. For example, in France in the 1930s the foreign workers came mainly from Poland, Italy, and Spain. In the 1950s and 60s both France and Italy started receiving colored and black Africans. India receives illegal migrants from Nepal and Bangladesh. America receives both legal and illegal migrants from its neighboring countries. Legal and illegal migrants are of great concern to politicians and policymakers, since such migration has an impact on resident welfare. Migration implies the use of resources in arriving at the optimal number of migrants. 1 This paper analyzes the economic consequences of illegal migrants in the context of a model of trade and growth. It has been noted that illegal migrants generally work in “three-dimensional jobs”: dirty, dangerous, and dull. 2 Our model captures this par- ticular phenomenon concerning illegal migration by using the framework of Mussa (1982). The essential idea of Mussa’s paper is that units of the factor labor employed in one sector are not perfectly substitutable for units of the same factor in the other sector. In the context of our model we shall make two specific assumptions. First, we shall assume that illegal migrants are sector-specific and so they do not work in the other sector. 3 Second, we shall assume that domestic labor employed in the sector using illegal migrants are less productive, so the same unit of labor becomes more produc- tive when it is employed in the other sector. In this context the papers of Lancaster (1958) and Casas (1984) are of relevance. In his discussion on productivity-geared wages policy, Lancaster introduces a term he calls the “elasticity of labor mobility.” This elasticity, denoted by m, is defined as the ratio of the proportionate change in labor response in the two sectors in response to a proportionate change in the wage rate in the two sectors. That is: m dL L L L dw w w w X Z X Z X Z X Z = ( ) ( ) . Review of Development Economics, 4(3), 258–267, 2000 © Blackwell Publishers Ltd 2000, 108 Cowley Road, Oxford OX4 1JF, UK and 350 Main Street, Malden, MA 02148, USA *Hazari and Sgro: School of Economics, Faculty of Business and Law, Deakin University, 221 Burwood Highway, Burwood, Victoria 3125, Australia. Tel: +61 3 9244 6398; Fax: +61 3 9244 6064; E-mail: hazari@deakin.edu.au, sgro@deakin.edu.au.We thank Professor Chong-Kee Yip and the participants at the Dynamic, Economics Growth and International Trade Conference, 22–23 July 1997, Department of Eco- nomics, Chinese University of Hong Kong.We also thank two anonymous referees for valuable comments.