Economic Research Working Papers

Working papers from the Federal Reserve Bank of Dallas are preliminary drafts circulated for professional comment.

2003 | 2002 | 2001 | 2000 | 1999 | 1998 and earlier

2003 Working Papers

0305
A Role for Government Policy and Sunspots in Explaining Endogenous Fluctuations in Illegal Immigration [PDF]
Mark G. Guzman, Pia M. Orrenius and Joseph Haslag

In this paper we provide an alternative explanation for why illegal immigration can exhibit substantial fluctuations despite a constant wage gap. We develop a model economy in which migrants make decisions in the face of uncertain border enforcement and lump-sum transfers from the host country. The uncertainty is extrinsic in nature, a sunspot, and arises as a result of ambiguity regarding the commodity price of money. Migrants are restricted from participating in state-contingent insurance markets in the host country, whereas host country natives are not. We establish the existence of sunspot equilibria that are not mere randomizations over certainty equilibria. Volatility in migration flows stems from two distinct sources: the tension between transfers inducing migration and enforcement discouraging it and secondly the existence of a sunspot. Finally, we examine the impact of a change in tax/transfer policies by the government on migration.

0304
Business Cycles: The Role of Energy Prices [PDF]
Stephen P. A. Brown, Mine K. Yücel, and John Thompson

Oil price shocks have figured prominently U.S. business cycles since the end of World War II—although the relationship seems to have weakened during the 1990s. In addition the economy appears to respond asymmetrically to oil price shocks, rising oil prices hurt economic activity more than falling oil prices help it. This section of the Encyclopedia of Energy sorts through an extensive economics literature that relates oil price shocks to aggregate economic activity. It examines how oil price shocks create business cycles, why they seem to have a disproportionate effect on economic activity, why the economy responds asymmetrically to oil prices, and why the relationship between oil prices and economic activity may have weakened. It also addresses the issue of developing energy policy to mitigate the economic effects of oil price shocks.

0303
The Impact of Illegal Immigration and Enforcement on Border Crime Rates [PDF]
Roberto Coronado and Pia M. Orrenius

In the 1990s, while there was a large decline in property-related crime along the U.S.–Mexico border, violent crime rates began to converge to the national average. At the same time, legal and illegal immigration from Mexico surged and border enforcement rose to unprecedented levels. In this paper, we investigate the relationship between border county crime rates, immigration and enforcement since the early 1990s. We find that while the volume of illegal immigration is not related to changes in property-related crime, there is a significant positive correlation with the incidence of violent crime. This is most likely due to extensive smuggling activity along the border. Border enforcement meanwhile is significantly negatively related to crime rates. The bad news is that the deterrent effect of the border patrol diminishes over this time period, and the net impact of more enforcement on border crime since the late 1990s is zero.

0302
Does Immigration Affect Wages? A Look at Occupation-Level Evidence [PDF]
Pia M. Orrenius and Madeline Zavodny

Previous research has reached mixed conclusions about whether higher levels of immigration reduce the wages of natives. This paper reexamines this question using data from the Current Population Survey and the Immigration and Naturalization Service and focuses on differential effects by skill level. Using occupation as a proxy for skill, we find that an increase in the fraction of workers in an occupation group who are foreign born tends to lower the wages of low-skilled natives—particularly after controlling for endogeneity—but does not have a negative effect among skilled natives.

0301
Fiscal Policy and Growth [PDF]
Dong Fu, Lori L. Taylor and Mine K. Yücel

In the literature neither taxes, government spending nor deficits are robustly correlated with economic growth when evaluated individually. The lack of correlation may arise from the inability of any single budgetary component to fully capture the stance of fiscal policy. We use pair-wise combinations of fiscal indicators to assess the relationship between fiscal policy and U.S. growth.

We develop a VAR methodology for evaluating simultaneous shocks to more than one variable and use it to examine the impulse responses for simultaneous, unexpected and equivalent structural shocks to pair-wise combinations of fiscal indicators. We also exploit the identity relationship between taxes, spending and deficits and follow Sims and Zha (1998) to evaluate an unexpected structural shock to one included fiscal indicator, holding constant the other included indicator. We find that an increase in the size of federal government leads to slower economic growth, that the deficit is an unreliable indicator of the stance of fiscal policy, and that tax revenues are the most consistent indicator of fiscal policy.