Immigration, Search, and Redistribution: A Quantitative Assessment of Native Welfare
Michele Battisti, Gabriel Felbermayr, Giovanni Peri and Panu Poutvaara, 2016
We study the effects of immigration on native welfare in a general equilibrium model fea- turing two skill types, search frictions, wage bargaining, and a redistributive welfare state. Our quantitative analysis suggests that, in all 20 countries studied, immigration attenuates the effects of search frictions. These gains tend to outweigh the welfare costs of redistribution. Im- migration has increased native welfare in almost all countries. Both high-skilled and low-skilled natives benefit in two thirds of countries, contrary to what models without search frictions pre- dict. Median total gains from migration are 1.19% and 1.00% for high and low skilled natives, respectively.