Winners and losers of immigration

Abstract

We study the impact of low-skilled immigration in a general equilibrium search and matching model, with heterogeneous workers producing intermediate goods, which are used in the production of two final goods. In addition to complementarity/substitution between native and non-native workers, we explore how immigration affects the relative prices of final goods and wages. An application to Italy reveals a positive contribution of immigrants to GDP, public revenues, and the per capita provision of public goods. Employers and employees in the high-skilled-intensive market are winners, while losers are employers in the low-skilled-intensive market. The effects on low-skilled employees are instead inconclusive.