Immigration and Local Inflation

Philip Barrett and Brandon Tan

No 2025/005, IMF Working Papers from International Monetary Fund

Abstract: We use a shift-share approach to estimate the impact of inward immigration on local inflation in the United States. We find that a higher rate of immigration reduces inflation, lowering it by about 0.1 to 0.2 percentage points following a doubling of immigration. Higher immigration flows also lower local goods inflation, increase local housing and utilities inflation, and have no statistically significant impact on inflation in other services. Effects are approximately two and three time larger for working age and low-education immigrants. We do not detect a statistically significant impact of more educated immigrants on overall inflation, but they do increase local housing inflation. Our results can be jointly rationalized by a simple general equilibrium model where the substitutability of capital and labor varies across industries but capital is fixed in the short run.

Keywords: Immigration; inflation; utilities inflation; goods inflation; housing inflation; inflation in the United States; price level; Migration; Housing; Labor supply; Caribbean (search for similar items in EconPapers)
Pages: 50
Date: 2025-01-10
New Economics Papers: this item is included in nep-int, nep-mig, nep-mon and nep-ure
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