Labor Market Impact of an Immigration Amnesty: The Spanish Amnesty of 2005

This thesis analyzes the impact of the Spanish amnesty to illegal immigrants in 2005, using both an ex-ante and ex-post approach to the problem. In 2005, the Spanish Cortes Generales passed a labor reform law that included a general amnesty to all illegal immigrants working in Spain at the time. With an illegal population estimated at just below two percent of the total population (and four percent of the labor force), this measure had a sizable potential impact on the Spanish economy, and specifically on unemployment rates.;We study this impact by developing and estimating a model of the labor market that focuses on the link between illegal immigration and informal labor contracts. By its nature, the model may be used for an evaluation of the policy either before or after it is implemented. We illustrate this by using data from the year 2000, and from 2007.;Chapter 1 describes the Spanish labor market in 2000 and 2007, and introduces the data sources that will be used to carry out our analysis.;Chapter 2 develops a structural model of the labor market and the approach to estimation. The model focuses on formal contracts being unavailable to illegal immigrants as a channel connecting legal and illegal residents. We present Monte Carlo simulation results that show that our estimation approach is valid, and a first set of estimates based on data from the European Union panel from the year 2000. Our estimates forecast no discernible effect of the amnesty on unemployment rates.;Chapter 3 applies our model to data from after the amnesty. The nature of these data sources requires us to combine them, and we show how that may be achieved. Our best specification shows a small beneficial impact of the amnesty on unemployment rates of natives and immigrants. Finally, we introduce a modification of the model that can better account for the short-term labor contracts that were introduced in Spain in the late nineteen-nineties.