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Are Work Permit Markets Welfare-Enhancing?
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To reap the benefits of greater international mobility, schemes for the sale of work permits to immigrants from developing countries have attracted increasing attention. Adnan's study exploits a unique opportunity to investigate an existing work permit market's pricing strategies and welfare consequences. The setting consists of Palestinian buyers who illicitly purchase work permits from Israeli private agents. Moreover, during her period of interest, Israel implemented a reform to reduce the number of undocumented Palestinians working in Israel without a permit, thereby expanding the permit market. Using novel data, Adnan shows that the number of permits purchased increased by 70% in response to the reform, while permit prices rose by 14%, thus doubling black-market revenue from 598million NIS [US $166] to 1.14 billion NIS [the US $317 million]. At the same time, worker surplus (take-home pay) was reduced substantially by 1.3 billion NIS [US$361million]. Adnan found that permit brokers could exploit their market power to maximize profits by devising and then adapting a pricing strategy that took advantage of market forces, the institutional setting, and workers' circumstances. In 2018, the pricing strategy was highly regressive, while in 2019, brokers (unevenly) raised prices and employed aggressive price discrimination tactics. Her findings have profound implications for policymakers seeking to create an efficient and equitable market for work permits and those who seek to protect migrant workers from exploitative practices in host countries.
Speakers
Wifag Adnan
Assistant Professor of Economics
New York University - Abu Dhabi
Wifag Adnan completed her Ph.D. in Economics from Princeton University in September 2012. Her dissertation chapters involved quantifying the labor market costs of conflict in politically volatile regions such as the West Bank and the Gaza Strip. Today, most of her research focuses on how labor markets function in developing and emerging economies (especially in the MENA region). The topics she has worked on span labor mobility, job search, unemployment, labor market segmentation, wage differentials, female labor force participation and education. In a current project, she explores the relationship between conflict and labor market outcomes. She uses a range of variables to measure conflict to identify how different modes of conflict shape decisions and economic effects for men and women separately. Current research proposals also include evaluating labor reforms (e.g., enforcement of banning underground employment, changes in labor contracts, and work permits) in various contexts to examine subsequent mobility patterns and the potential effects on wages, employment, and well-being. In separate research on agenda involving the integration of immigrants in the US and Europe, she has a recent project that aims to uncover how labor market outcomes of descendants of US immigrants respond to changes in local factors after accounting for variation in key characteristics across countries of origin.