Policies on illegal immigration in a federation

Illegal immigration is a major policy challenge in Europe, in particular in countries on the external border of the EU such as Italy or Spain. However, there are likely to be important effects on the rest of the EU, too, depending on the policies against illegal immigration in border countries. This paper determines optimal enforcement and amnesty policies on immigration in a two-country, two-instrument setting with international spill-overs from onward migration within a federation, taking into account the interactions between the two types of policies. Among other results we find that total enforcement spending is too low to maximize joint welfare in the federation.

► We examine optimal amnesty and enforcement policies on illegal immigration in a federation. ► Interactions arise between the two types of policies and between countries due to onward migration. ► Greater onward migration increases or decreases enforcement spending according to conditions provided. ► The effect of onward migration on an amnesty in the border country depends on the degree of redistribution in that country. ► Total enforcement spending is too low to maximize joint welfare in the federation.