A Theoretical Perspective on Human Trafficking and Migration-Debt Contracts

Abstract

This article develops an economic model of human trafficking and migration-debt contracts. A key feature of the theoretical model is the payment of additional sums beyond the initial contracted price to alter the trafficker's queue order. These bribes are shown to be related to the level of effort applied by the trafficker. The types of data needed to rigorously test the model are discussed, together with policy implications.

Acknowledgements

Paul Miller acknowledges financial assistance from the Australian Research Council. We are grateful to two anonymous referees, and to participants at the Workshop on Human Trafficking, International Crime and National Security: A Human Rights Perspective, held in Goettingen, February 2012, and in particular to Ira Gang, for helpful comments.

Notes

1. For a detailed analysis of the business of trafficking and exploitation, see Salt and Stein (1997).

2. People smugglers are different from traffickers in that people smugglers move people across national borders illegally, but without exploiting them. Traffickers are associated with movement across national borders and exploitation.

3. Tamura (2010, footnote 28) notes that the model can be generalised to consider an expanded range of services being offered by the smuggler, such as border crossing and employment in the destination.

4. Martin (2010) also draws attention to the very high interest rates, of 10 per cent a month, on such loans.

5. The kafala system refers to sponsorship of a potential migrant by an employer in the destination country. Under this system the migrant is tied to the particular sponsor, or kafeel.

6. In the absence of collateral, the illegal migrant may need to resort to debt-labour contracts involving temporary servitude, though these are more difficult to enforce.

7. Rahman (2012) also notes that kickback fees (payments to those abroad organising an employer-sponsored visa) are a characteristic of most applications processed by migrant brokers in Bangladesh.

8. Given that M has already made his down payment by this stage, there is no real opportunity to shop around for a T who might accept a lower β. M is essentially trapped, and T has monopoly power.

9. This need not necessarily represent punitive action on the part of the trafficker, but can simply be a shuffling down the queue order as a result of other potential migrants offering greater additional payments. Related to this, Martin (2010), when describing the situation in the Philippines, states ‘Fees paid to private recruiters represent the largest cost of working overseas. The Philippine Overseas Employment Administration limits private recruiter fees to one month's wages abroad, but migrants who know that there are more applicants than jobs sometimes pay more’ (Martin, 2010, p. 11).

10. The payoff without β is . If a < C, the migrant remains at home. In this case, p ₂ could be thought as a ‘migration-debt-contract’ (Friebel and Guriev, 2006).

11. Friebel and Guriev (2006, p. 1087) note that their theory of migration-debt contracts ‘applies mainly to long-haul migration, for instance from China or South Asia to the US or EU, where migration costs are too high to be paid up front. It may be less appropriate for short-haul migration, for instance, between Mexico and the US, or Albania and Italy’.