DP12726 Understanding the Effects of Legalizing Undocumented Immigrants

Author(s): Ferran Elias, Joan Monras, Javier Vázquez Grenno
Publication Date: February 2018
Date Revised: October 2019
Keyword(s): Immigration, public policy, undocumented immigrants
JEL(s): F22, J31, J61, R11
Programme Areas: International Trade and Regional Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=12726

This paper studies the legalization of 600,000 non-EU immigrants by the unexpectedly elected Spanish government following the terrorist attacks of 2004. By comparing non-EU to EU immigrants we first estimate that the policy did not lead to magnet effects. We then show that the policy change increased labor market opportunities for immigrants by allowing them to enter sectors of the economy with fewer informal employment. We finally rely on cross-province comparisons to document that a) for each legalized immigrant payroll-tax revenues increased by at least 4,000 euros, b) the policy change deteriorated the labor-market outcomes of a selected group of low-skilled natives, improved the outcomes of high-skilled workers, and induced some low-skilled immigrants to move away from high-immigrant locations.