Temporary Immigration Visas

This paper deals with recent proposals concerning temporary immigration visas as a means to combat the problem of illegal immigration. We set up a simple two-period model of international migration between a poor South and a rich North with temporary visas issued for one period. Because of capital market imperfections, immigrants from the South face additional capital costs when financing the visa fee. In this model we find that temporary visas can improve welfare in the North if capital costs of the immigrants are sufficiently low. For high capital costs, however, a welfare reduction can not be ruled out. We extend the model to the case of heterogeneous immigrants and asymmetric information. In this setting we show that the government in the North may have an incentive to issue temporary visas for those with low capital costs and to tolerate illegal immigration of the others