Immigration and spatial equilibrium: the role of expenditures in the country of origin

Albert, Christoph; Monràs, Joan

doi:http://dx.doi.org/10.1257/aer.20211241

Immigration and spatial equilibrium: the role of expenditures in the country of origin

Citation

Albert C, Monras J. Immigration and spatial equilibrium: the role of expenditures in the country of origin. Am Econ Rev. 2022 Nov;112(11):3763-802. DOI: 10.1257/aer.20211241

Abstract

We document that international migrants concentrate more in expensive cities—the more so, the lower the prices in their origin countries are—and consume less locally than comparable natives. We rationalize this empirical evidence by introducing a quantitative spatial equilibrium model, in which a part of immigrants' income goes toward consumption in their origin countries. Using counterfactual simulations, we show that, due to this novel consumption channel, immigrants move economic activity toward expensive, high-productivity locations. This leads to a more efficient spatial allocation of labor and, as a result, increases the aggregate output and welfare of natives.