G-MonD Note n°17

« Wages, Taxes… and Prices: Global Migration and the Real Income of European »

Author :Frédéric Docquier
Abstract:

The rising mobility of people has triggered lively debates over the societal and economic consequences of global migration. Contrary to popular perceptions, the academic literature has identified relatively small labor market and fiscal responses to migration. However, most existing studies have disregarded the effect of global migration on the market size, on firms’ entry/exit decisions, and on the variety of goods available to consumers. By affecting the variety of goods, migration-driven changes in market size influence the consumer price index and the real income of people. This note suggests that this market-size channel is crucial to understanding the economic consequences of recent migration flows. On average, the 2000-2010 inflows and outflows of migration decreased the consumer price index by 1.4 percent in the EU15. Although the labor market and fiscal responses to migration are non-negligible in some countries, the market-size effect is a greater source of variability – usually a source of gain – in real income.

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