Working Paper: CEPR ID: DP12842
Authors: Joan Monras; Christoph Albert
Abstract: We show that immigrants in the US concentrate in expensive cities, the earnings gap between natives and immigrants is larger in these cities, and these patterns are stronger when prices in the country of origin are lower. To rationalize this empirical evidence, we propose a quantitative spatial equilibrium model in which immigrants spend a fraction of their income in their countries of origin. Our model serves two purposes. First, to develop a new instrument for immigrant shocks that we use to test the model's predictions on native internal relocation responses. Second, to evaluate the consequences of immigration for aggregate productivity.
Keywords: immigration; location choices; spatial equilibrium
JEL Codes: F22; J31; J61; R11
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| city price levels (P22) | immigrant concentration (J61) |
| lower real exchange rates in immigrants' countries of origin (F16) | immigrant concentration in expensive cities (R23) |
| lower real exchange rates in immigrants' countries of origin (F16) | greater wage gaps (J31) |
| immigrant inflows (J61) | native relocation patterns (J61) |