Association for Public Policy Analysis & Management

Effects of immigration on labor market outcomes and crime rate are controversial. To rationalize the effects of immigration, this paper constructs a channel to connect immigration and criminal behavior based on a frictional labor market. The model indicates that immigration reduces unemployment rate and increases wages of native workers. All workers in this economy may meet a criminal opportunity but only commit it when it has sufficiently high value. The effect of immigration on crime rate is ambiguous because of contrary criminal behavior of employed and unemployed worker. Employed workers commit more crimes while unemployed workers prefer to stay unemployed when the labor market is tighter. This model is also used to study labor market and justice policies. For example, a more generous unemployment insurance system for immigrants increases unemployment rate and crime rate, and decreases native wages. Longer duration of incarceration reduces the crime rate rate, but has no impact of native wages and unemployment rate. Deportation prevents immigrants from committing crimes but does not affect the criminal behavior of native workers.