Undocumented migrants in debt

Numerous studies suggest that illegal immigration in the form of bonded labor is becoming an increasingly important phenomenon. This paper develops a model of optimizing behavior of undocumented immigrants who are employed in the host country as bonded laborers while repaying their debts to human smugglers. The analysis relates the optimal duration of the repayment period and the migrant's consumption path to the stock of debt, the rate of interest charged by the smuggler and the levels of the bonded and free-market wages in the destination country. This provides a framework for examining the effectiveness of immigration controls, internal enforcement measures and deportation policies of the host country in deterring debt-bonded migration.

► We examine factors influencing the optimal behavior of debt-bonded migrants.
► How consumption and debt repayment are affected by the conditions abroad.
► We study the relative effectiveness of immigration policies of the host country.