Immigrants' Residential Choices and Their Consequences

Christoph Albert and Joan Monras

No 11075, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: This paper investigates the causes and effects of the spatial distribution of immigrants across US cities. We document that: a) immigrants concentrate in large, high-wage, and expensive cities, b) the earnings gap between immigrants and natives is higher in larger and more expensive cities, and c) immigrants consume less locally than natives. In order to explain these findings, we develop a simple quantitative spatial equilibrium model in which immigrants consume (either directly, via remittances, or future consumption) a fraction of their income in their countries of origin. Thus, immigrants not only care about local prices, but also about price levels in their home country. Hence, if foreign goods are cheaper than local goods, immigrants prefer to live in high-wage, high-price, and high-productivity cities, where they also accept lower wages than natives. Using the estimated model we show that current levels of immigration have reduced economic activity in smaller, less productive cities by around 3 percent, while they have expanded the activity in large and productive cities by around 4 percent. This has increased total aggregate output per worker by around 15 percent.

Keywords: spatial equilibrium; location choices; immigration (search for similar items in EconPapers)
JEL-codes: F22 J31 J61 R11 (search for similar items in EconPapers)
Pages: 47 pages
Date: 2017-10
New Economics Papers: this item is included in nep-lab, nep-mig and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Related works:
Working Paper: Immigrants' Residential Choices and their Consequences (2018)
Working Paper: Immigrants' Residential Choices and their Consequences (2017)
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