Monopsony, Efficiency, and the Regularization of Undocumented Immigrants

Abstract

In 1981, President Mitterrand regularized the status of undocumented immigrants in France, who comprised 12 percent of the non-French workforce and about 1 percent of all workers. Employers have monopsony power over undocumented workers because the undocumented find it costly to participate in the open market. By alleviating this labor market imperfection, a regularization program can move the market closer to the efficient competitive equilibrium and increase employment and wages for the authorized workforce. Our empirical analysis reveals that the Mitterrand regularization program raised employment and wages for low-skill native and immigrant men and increased per-capita GDP.