Legal status and immigrants' educational investment decisions

We develop a two-period model of educational investment where current legal status and expectations about future legal status affects educational investment decisions. The theoretical model predicts that educational investment among illegal immigrants is a decreasing function of deportation probability. The theoretical model also suggests that which group (illegal or legal immigrants), will invest more in education depends on subjective beliefs and relative returns to education. Next we analyze educational investment using data from the two waves of New Immigrant Survey, supplemented with enforcement data. Empirical results show that an increase in deportation probability reduces educational investment among illegal immigrants. Empirical results also show that legalization increases the probability of investment in education by 15.5 percentage points among illegal immigrants.