Winners and losers of immigration

TL;DR

This paper analyzes the economic impact of low-skilled immigration using a general equilibrium model, revealing winners and losers across different labor markets and effects on prices, wages, and public finances.

Contribution

It introduces a comprehensive model that captures heterogeneity among workers and the effects of immigration on multiple economic variables, applied specifically to Italy.

Findings

Immigration positively impacts GDP, public revenues, and public goods provision.

High-skilled market participants benefit, while low-skilled employers may lose.

Effects on low-skilled employees are inconclusive.

Abstract

We study the impact of low-skilled immigration in a general equilibrium search and matching model, with heterogeneous workers producing intermediate goods, which are used in the production of two final goods. In addition to complementarity/substitution between native and non-native workers, we explore how immigration affects the relative prices of final goods and wages. An application to Italy reveals a positive contribution of immigrants to GDP, public revenues, and the per capita provision of public goods. Employers and employees in the high-skilled-intensive market are winners, while losers are employers in the low-skilled-intensive market. The effects on low-skilled employees are instead inconclusive.