We build a general equilibrium model in which both illegal immigration and the size of the informal sector are endogenously determined. In this framework, we show that indirect policy measures such as tax reduction and detection of informal activities can be used as substitutes for border...

Border enforcement of immigration laws raises the costs of illegal immigration, while interior enforcement also lowers its benefits. Used together, border and interior enforcement therefore reduce the net benefits of illegal immigration and should lower the probability that an individual will...

Illegal migrants supply a valuable productive input: effort. But their status as illegals means that these migrants face a strictly positive probability of expulsion. A return to their country of origin entails reduced earnings when the wage at origin is lower than the wage at destination. This...