Distributional effects of immigration and imperfect labour markets

Julián Costas-Fernández and Simón Lodato

Economics Letters, 2024, vol. 242, issue C

Abstract: In canonical models, the labour share is orthogonal to immigration shocks in the long run, regardless of the impact of immigration on productivity. In contrast, this paper provides evidence that immigration increases labour productivity while reducing the labour share. We produce this evidence using data from Great Britain with a shift-share instrument that exploits European Union expansions and changes in immigration to other high-income countries. Our results are consistent with the predictions from imperfect labour market models, where immigrant and native workers are heterogeneous in skills, and the former have lower labour supply elasticities than the latter. A significant implication of our analysis is that immigration redistributes income from workers to employers.

Keywords: Immigration; Productivity; Labour share; Imperfect labour markets; Factor income distribution (search for similar items in EconPapers)
JEL-codes: D33 J21 J24 J42 J61 O47 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:242:y:2024:i:c:s0165176524003161

DOI: 10.1016/j.econlet.2024.111832

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