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The Labor Supply Curve is Upward Sloping: The Effects of Immigrant-Induced Demand Shocks

Author

Listed:
  • Jonathan Vogel
  • Andreas Kostøl
  • Joan Monràs
  • Sigurd Galaasen

Abstract

What is the effect of immigration on native labor-market outcomes? An extensive literature identifies the differential impact of immigration on natives employed in jobs that are more exposed to immigrant labor (supply exposure). But immigrants consume in addition to producing output. Despite this, no literature identifies the impact on natives employed in jobs that are more exposed to immigrant consumption (demand exposure). We study native labor-market effects of supply and demand exposures to immigration. Theoretically, we formalize both measures of exposure and solve for their effects on native wages. Empirically, we combine employer-employee data with a newly collected dataset covering electronic payments for the universe of residents in Norway to measure supply and demand exposures of all native workers to immigration induced by EU expansions in 2004 and 2007. We find large, positive, and persistent effects of demand exposure to EU expansion on native worker income.

Suggested Citation

  • Jonathan Vogel & Andreas Kostøl & Joan Monràs & Sigurd Galaasen, 2025. "The Labor Supply Curve is Upward Sloping: The Effects of Immigrant-Induced Demand Shocks," Working Papers 1496, Barcelona School of Economics.
    • Handle: RePEc:bge:wpaper:1496
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    References listed on IDEAS

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    1. Michael A. Clemens & Ethan G. Lewis & Hannah M. Postel, 2018. "Immigration Restrictions as Active Labor Market Policy: Evidence from the Mexican Bracero Exclusion," American Economic Review, American Economic Association, vol. 108(6), pages 1468-1487, June.
    2. Joan Llull, 2018. "Immigration, Wages, and Education: A Labour Market Equilibrium Structural Model," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 85(3), pages 1852-1896.
    3. George J. Borjas, 2021. "The Labor Demand Curve Is Downward Sloping: Reexamining The Impact Of Immigration On The Labor Market," World Scientific Book Chapters, in: Foundational Essays in Immigration Economics, chapter 9, pages 235-274, World Scientific Publishing Co. Pte. Ltd..
    4. Joan Monras, 2020. "Immigration and Wage Dynamics: Evidence from the Mexican Peso Crisis," Journal of Political Economy, University of Chicago Press, vol. 128(8), pages 3017-3089.
    5. Manudeep Bhuller & Karl Ove Moene & Magne Mogstad & Ola L. Vestad, 2022. "Facts and Fantasies about Wage Setting and Collective Bargaining," Journal of Economic Perspectives, American Economic Association, vol. 36(4), pages 29-52, Fall.
    6. Anthony Edo, 2020. "The Impact of Immigration on Wage Dynamics: Evidence from the Algerian Independence War," Journal of the European Economic Association, European Economic Association, vol. 18(6), pages 3210-3260.
    7. Benjamin Faber & Cecile Gaubert, 2019. "Tourism and Economic Development: Evidence from Mexico's Coastline," American Economic Review, American Economic Association, vol. 109(6), pages 2245-2293, June.
    8. repec:oup:qjecon:v:132:y:2016:i:1:p:435-483. is not listed on IDEAS
    9. Ariel Burstein & Gordon Hanson & Lin Tian & Jonathan Vogel, 2020. "Tradability and the Labor‐Market Impact of Immigration: Theory and Evidence From the United States," Econometrica, Econometric Society, vol. 88(3), pages 1071-1112, May.
    10. Ethan Lewis, 2011. "Immigration, Skill Mix, and Capital Skill Complementarity," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 126(2), pages 1029-1069.
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    Cited by:

    1. Daniel J. Wilson & Xiaoqing Zhou, 2026. "The Impacts of Unauthorized Immigration on U.S. Labor and Housing Markets: New Evidence from Administrative Microdata," Working Papers 2607, Federal Reserve Bank of Dallas.
    2. Joan Monràs, 2025. "Immigrant Assimilation Beyond the Labor Market," Working Papers 1517, Barcelona School of Economics.
    3. Ryan Kim & Justin H. Leung & Ariel Weinberger, 2026. "Prices and Immigration: A Firm Level Analysis," CESifo Working Paper Series 12588, CESifo.
    4. Peter Haan & Julia Schmieder & Izabela Wnuk-Soares, 2026. "The Supply-Side Effect of Immigration on Prices: Evidence from Nursing Homes," Rationality and Competition Discussion Paper Series 585, CRC TRR 190 Rationality and Competition.

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    Keywords

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    JEL classification:

    • J2 - Labor and Demographic Economics - - Demand and Supply of Labor
    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers
    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration

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