| Abstract: | Abstract. In this paper's model, undocumented workers are endogenously sorted into secondary labor markets. When further illegal immigration occurs, some new migrants follow their fellows into already migrant‐dominated jobs, lowering migrant wages and raising real incomes of host‐country labor and capital. Some submarkets switch from employing legal workers to employing migrants, lowering demand for and wages of legal workers. Undocumented immigration is Pareto‐improving when enforcement reserves primary‐sector jobs for legal workers. Pareto‐dominant policies target the number of migrant‐dominated submarkets, not the number of migrants. This appears consistent with U.S. enforcement practices. The effects of deportations, employer sanctions, and amnesties are explored. |
