Occupational barriers and the productivity penalty from lack of legal status

•Identification of the productivity penalty is crucial to estimate the net economic gains from legalization.•Our paper presents a model-based strategy to identify the productivity penalty associated with lack of legal status.•We estimate that the productivity penalty associated with lack of legal status in the United States is upward of 12% and affects roughly one third of undocumented workers.•Thus, legalization of undocumented workers not only improves their wages, but also increases GDP.•We estimate legalization would increase U.S. GDP by a minimum of 0.96%.