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Immigration and Spatial Equilibrium: the Role of Expenditures in the Country of Origin

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  • Albert, Christoph
  • Monras, Joan

Abstract

This paper investigates the spatial distribution of immigrants across US cities. We document that: a) immigrants concentrate in large, expensive cities, b) the earnings gap between natives and immigrants is higher in these cities, c) these patterns are stronger when price levels in the country of origin are lower, and d) immigrants consume less locally than natives. We develop a spatial equilibrium model in which immigrants spend a fraction of their income in their countries of origin. Thus, immigrants care not only about local prices but also about price levels in their home countries, which gives them a comparative advantage for living in more productive cities, where they accept lower wages than natives. We rely on variation in the origin price level to estimate the model. Counterfactual simulations suggest that current levels of immigration have reduced economic activity in smaller, less productive cities, while they have expanded it in large, productive ones. This has increased total worker productivity by around 1% and aggregate native workers' welfare by around 0.35%.

Suggested Citation

  • Albert, Christoph & Monras, Joan, 2018. "Immigration and Spatial Equilibrium: the Role of Expenditures in the Country of Origin," CEPR Discussion Papers 12842, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:12842
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    Cited by:

    1. Joan Monràs & Javier Vázquez-Grenno & Ferran Elias, 2020. "Understanding the effects of granting work permits to undocumented immigrants," Economics Working Papers 1762, Department of Economics and Business, Universitat Pompeu Fabra.
    2. Zabek, Mike, 2018. "Local Ties in Spatial Equilibrium," SocArXiv rpq5z, Center for Open Science.
    3. Gaetano Basso & Giovanni Peri, 2020. "Internal Mobility: The Greater Responsiveness of Foreign-Born to Economic Conditions," Journal of Economic Perspectives, American Economic Association, vol. 34(3), pages 77-98, Summer.
    4. David Albouy & Alex Chernoff & Chandler Lutz & Casey Warman, 2019. "Local Labor Markets in Canada and the United States," Journal of Labor Economics, University of Chicago Press, vol. 37(S2), pages 533-594.
    5. Fiaschi, Davide & Tealdi, Cristina, 2020. "Winners and Losers of Immigration," IZA Discussion Papers 13600, Institute of Labor Economics (IZA).
    6. Tian, Yuan & Caballero, Maria Esther & Kovak, Brian K., 2022. "Social learning along international migrant networks," Journal of Economic Behavior & Organization, Elsevier, vol. 195(C), pages 103-121.
    7. Goerlach, Joseph-Simon, 2021. "Borrowing Constraints and the Dynamics of Return and Repeat Migration," IZA Discussion Papers 14817, Institute of Labor Economics (IZA).
    8. Jérôme Adda & Christian Dustmann & Joseph-Simon Görlach, 2022. "The Dynamics of Return Migration, Human Capital Accumulation, and Wage Assimilation [Immigration and Spatial Equilibrium: The Role of Expenditures in the Country of Origin]," Review of Economic Studies, Oxford University Press, vol. 89(6), pages 2841-2871.
    9. Christoph Albert & Joan Monràs, 2019. "The regional impact of economic shocks: Why immigration is different from import competition," Economics Working Papers 1758, Department of Economics and Business, Universitat Pompeu Fabra, revised Dec 2020.
    10. Giacomo Battiston, 2022. "Rescue on Stage: Border Enforcement and Public Attention in the Mediterranean Sea," "Marco Fanno" Working Papers 0292, Dipartimento di Scienze Economiche "Marco Fanno".
    11. Davis, Donald R. & Dingel, Jonathan I., 2020. "The comparative advantage of cities," Journal of International Economics, Elsevier, vol. 123(C).
    12. Christian Dustmann & Hyejin Ku & Tanya Surovtseva, 2021. "Real Exchange Rates and the Earnings of Immigrants," CReAM Discussion Paper Series 2110, Centre for Research and Analysis of Migration (CReAM), Department of Economics, University College London.
    13. Serdar Birinci & Fernando Leibovici & Kurt See, 2021. "The Allocation of Immigrant Talent: Macroeconomic Implications for the U.S. and Across Countries," Working Papers 2021-004, Federal Reserve Bank of St. Louis, revised Jun 2022.
    14. Serdar Birinci & Fernando Leibovici & Kurt See, 2021. "Immigrant Misallocation," LIS Working papers 809, LIS Cross-National Data Center in Luxembourg.

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    More about this item

    Keywords

    Immigration; location choices; spatial equilibrium;
    All these keywords.

    JEL classification:

    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes

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