Government policy under price uncertainty: A source of volatility in illegal immigration

摘要

This paper provides an alternative explanation for why illegal immigration can exhibit substantial volatility. We develop a model economy where migrants make decisions in the face of uncertain border enforcement and transfers from the host country. The uncertainty is extrinsic, a sunspot, and arises due to ambiguity regarding government policy; the sunspot manifests itself as uncertainty in the commodity price of money. Immigration volatility stems from both the trade-off between the marginal benefits and costs (transfers and enforcement) to migrating and the existence of a sunspot. Finally, we examine the impact of changes in government policies on migration levels.