Creating Illegal Immigrants

Governments have rarely been successful in adhering to intended consequences of temporary guest-worker policies. The conduit for legal entry of workers has resulted in a population of illegal workers, as the initially legal workers make the move to illegal employment. In this paper we examine the effectiveness of instituting a bond which seeks to make the legal employer the enforcement agent of the government. Our model shows how the bond affects the wage differential between legal and illegal employment of migrant workers, and thereby the incentives for transfer from legal to illegal employment and the extent to which workers remain illegally.