Fiscal Revenues and Commitment in Immigration Amnesties

- 24% of applications for immigration amnesties are rejected
- commitment problem: use the amnesty to deport illegals
- higher-income applicants legalized in equilibrium (“selective time-inconsistency”)
- the poorest immigrants do not apply in equilibrium
- immigration amnesties intrinsically provisional and sub-optimal

Immigration amnesties aim at reducing the size of the informal sector and identifying employers of undocumented workers. However, potential fiscal gains are also important: tax revenues are crucial in all kinds of amnesties. Nevertheless, over the last thirty years an average of 24% of all applications have been rejected. It remains an open question as to why governments accept this loss of fiscal base. We argue that applying for amnesty is basically self-incrimination, and that immigration-averse governments have an incentive to use applications as a means to identify and expel illegal workers. In equilibrium only applicants with the highest income are granted amnesty, while the poorest immigrants do not apply, and fiscal revenues remain sub-optimal. We show that electoral accountability can solve the commitment problem. However, the large number of rejections suggests that the strict voter-coordination required by this mechanism is hard to obtain in practice. Therefore immigration amnesties seem doomed to inefficiency.