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

Author

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  • Galaasen, Sigurd
  • Kostøl, Andreas
  • Monras, Joan
  • Vogel, Jonathan

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

  • Galaasen, Sigurd & Kostøl, Andreas & Monras, Joan & Vogel, Jonathan, 2025. "The Labor Supply Curve is Upward Sloping: The Effects of Immigrant-Induced Demand Shocks," CEPR Discussion Papers 20334, Centre for Economic Policy Research.
    • Handle: RePEc:cpr:ceprdp:20334
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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 Paper Series 2026-23, Federal Reserve Bank of San Francisco.
    2. Ryan Kim & Justin H. Leung & Ariel Weinberger, 2026. "Prices and Immigration: A Firm Level Analysis," CESifo Working Paper Series 12588, CESifo.
    3. Joan Monràs, 2025. "Immigrant Assimilation Beyond the Labor Market," Working Papers 1517, Barcelona School of Economics.
    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.
    5. Gaetano Basso & Mitali R. Mathur & Giovanni Peri, 2026. "Immigration and Macroeconomic Outcomes in OECD Countries," NBER Working Papers 35523, National Bureau of Economic Research, Inc.

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    Keywords

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    JEL classification:

    • F0 - International Economics - - General
    • J0 - Labor and Demographic Economics - - General

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