Working Paper: CEPR ID: DP6604
Authors: Samuel Bentolila; Juan José Dolado; Juan Francisco Jimeno
Abstract: The Phillips curve has flattened in Spain over 1995-2006: unemployment has fallen by 15 percentage points, with roughly constant inflation. This change has been more pronounced than elsewhere. We argue that this stems from the immigration boom in Spain over this period. We show that the New Keynesian Phillips curve is shifted by immigration if natives? and immigrants? labour supply or bargaining power differ. Estimation of the curve for Spain indicates that the fall in unemployment since 1995 would have led to an annual increase in inflation of 2.5 percentage points if it had not been largely offset by immigration.
Keywords: immigration; Phillips curve
JEL Codes: E31; J64
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Immigration (F22) | Phillips Curve (E31) |
| Immigration (F22) | Labor Supply (J20) |
| Labor Supply (J20) | Phillips Curve (E31) |
| Bargaining Power (C79) | Inflation Rates (E31) |
| Unemployment Rate of Immigrants (J69) | Wage Pressures (J39) |
| Inflation Dynamics (E31) | Phillips Curve (E31) |
| Reduction in Unemployment (J68) | Inflation (E31) |