Immigration, amnesties, and the shadow economy

Abstract

This paper investigates the effects of immigration and immigration amnesties on the shadow economy. We find a robust and positive relationship between the presence of immigrants and the unobserved economic activity at the local level, but the implementation of a large immigration amnesty substantially weakens this link. Our analysis exploits newly compiled datasets of Italian immigration and shadow economy estimates for the years 1995-2006, comprising a panel of local-level aggregate statistical information, and a micro-level survey of representative households. We exploit the discontinuity created by the 2002 immigration amnesty, which increased the stock of migrants by almost 50%.

The role of refugees in the underground economy of the European Union

“…A generous unemployment allowance can offer a comfortable standard of living, stimulating the employment in the official labor market given the attraction of social security benefits. The negative sign of the share of the immigrant population in respect to the underground economy does not confirm the mainstream literature (e.g., Crush et al, 2005;Landau, 2006;Bracco and Onnis, 2016;Venturini and Villosio, 2008). This is in accord with Schneider and Badekow (2006), who claim that permissive constraints created by public institutions and bureaucratic apparatus can be a significant disincentive for immigrants to access the underground economy.…”

“…There is an extended literature underlining the positive link between refugee inflow on underground economy. For example, the refugee inflows stimulate underground economy for Bracco and Onnis (2016). They confirm the aforementioned outcomes through ordinary least squares (OLS) and two-stage least squares (2SLS) models, invoking a strong connection between migrant inflows and activities in the informal economy.…”