The Economics of Human Smuggling

A global crackdown on illegal immigration has done little to stifle immigrants’ desire to seek opportunity in a foreign land. When immigrants cannot enter a country legally, they often employ the services of a smuggler to help them cross the border. Human smugglers made five billion dollars last year in the United States alone. Besides exorbitant prices, smuggling entails an enormous human cost; an estimated 2,000 people drown every year attempting to cross the Mediterranean Sea from Africa to Europe.

In a December 2011 NORFACE discussion paper, “Sale of Visas: A Smuggler’s Final Song?” Emmanuelle Auriol and Alice Mesnard argue that current immigration regulations have done little to solve the smuggler problem and offer a set of reforms to help dissolve smugglers’ operations.

The authors analyze the basic tools of immigration regulation at a government’s disposal: issuing visas, border enforcement, sanctioning employers who use undocumented workers, and deportation. They argue that each of these techniques involves a trade-off. If a government issues visas for purchase, smugglers will lose power, but less-skilled immigrants will likely enter the country because of reduced opportunity costs. On the other hand, more repressive policies that make it difficult to enter the country will result in fewer legal immigrants, but serve to bolster smugglers’ power.

Auriol and Mesnard craft a game theoretic model to illustrate just how complex the problem of human smuggling can be. Simply charging for visas, for example, would not end human smuggling because smugglers have established routes with low marginal costs. If a country sets one price for a visa, smugglers can lower their prices to compete with legal avenues of immigration. Instead, the authors argue for a two pronged approach: selling visas at a market price and using a combination of repressive measures (border enforcement, employer sanctions, and deportations) to increase smugglers’ operating costs and decrease the benefits to illegal immigration.

To set the cost of a visa, policymakers need to understand the risks to illegal immigrants and the value of legal status. According to their models, to end the smuggler problem in the United States, the U.S. government should sell visas for $18,336 if there is a 20 percent risk that an undocumented worker will be deported or for $46,575 if the risk is 70 percent. The authors also recommend that the U.S. government increase sanctions against the employers of undocumented immigrants. Under these conditions, they argue, human smugglers would be forced out of the market as the demand for their services dried up.

Auriol and Mesnard acknowledge the limitations of their theories. We have little data to  back up their theoretic models. They concede that their proposal would incite a great deal of political and economic opposition. However, the authors believe that the right combination of factors would be an effective and humane tool in the fight to end human smuggling.