Immigration, integration, and the informal economy in OECD countries. A new GLO Discussion Paper by GLO Fellow Isabelle Chort & colleagues.

A new GLO Discussion Paper suggests that both immigrants and asylum seekers increase the informal sector at destination; while the effect is about four times larger for asylum seekers than for immigrants, both are very small.

GLO Discussion Paper No. 1197, 2022

Immigration, integration, and the informal economy in OECD countries – Download PDF
by Ben Atta, Oussama & Chort, Isabelle & Senne, Jean Noël

GLO Fellow Isabelle Chort

Author Abstract: This article assesses the impact of immigrant and asylum seeker in ows on the size of the informal sector in host countries from a macroeconomic perspective. We use two indicators of informality provided by Medina and Schneider (2019) and Elgin and Oztunali (2012) combined with migration data from the OECD International Migration Database and data on asylum seeker ows from the UNHCR for the period 1997-2017. We estimate a first-difference model, instrumenting immigrant and asylum seeker ows by their predicted values derived from the estimation of a pseudo-gravity model. Results suggest that both immigrant and asylum seeker in ows increase the size of the informal sector at destination, but the size of the effect is very small: a one percentage point increase in the stock of immigrants as a share of population leads to an increase of the informal sector as a share of GDP of 0.05-0.06 percentage points. Unsurprisingly, the effect is about four times larger for asylum seeker ows, but remains economically insignificant. We investigate several potential channels, and find that integration policies do matter. We find no impact of imported norms or institutions, but rather that the effect is larger in destination countries with a large informal sector. Finally, we estimate a VAR model and find that the impact of in ows on informality is long-lasting.

Featured image: joshua-hoehne-on-unsplash

Vol. 36, Issue 1, January 2023: Journal of Population Economics (JOPE) 16 articles.
Watch the videos of article presentations on December 1, 2022 during the GLO Global Conference 2022.

JOPE has CiteScore 6.5 (2021, LINK) & Impact Factor 4.7 (2021, LINK)

GLO Discussion Papers are research and policy papers of the GLO Network which are widely circulated to encourage discussion. Provided in cooperation with EconStor, a service of the ZBW – Leibniz Information Centre for Economics, GLO Discussion Papers are among others listed in RePEc (see IDEAS,  EconPapers)Complete list of all GLO DPs – downloadable for free.

The Global Labor Organization (GLO) is an independent, non-partisan and non-governmental organization that functions as an international network and virtual platform to stimulate global research, debate and collaboration.