The role of immigration in a deep recession

Abstract

[eng] The increase in the foreign-born population is one of the main socio-economic changes that has been seen in many developed countries over the last decades. In the United States, the share of foreign-born individuals increased from 9.2% of the population in 1990 to 14.3% in 2010. More striking examples can be found in Europe. In Italy, over the same period, the share of foreign residents rose from 2.5% to 9.7%, whereas in Spain it increased from 2.1% to 14.4%. In these economies, the Great Recession took place contemporaneous to this context of large immigrant inflows. As a result of rigid labour markets, in Spain and Italy, the economic downturn triggered by the Great Recession led to a large increase in unemployment rather than substantial wage reductions (Font et al., 2015; Adamopoulou et al., 2016). Many papers have tried to estimate the impact of immigration on the labour market outcomes of host countries (see Dustmann et al., 2016 for a review of several important recent findings). Most of these papers either abstract from search frictions (Ottaviano and Peri, 2012; Dustmann et al., 2013; Peri and Sparber, 2009; Moreno-Galbis and Tritah, 2016; Llull, 2018) or focus on steady-state comparisons (Chassamboulli and Palivos, 2014; Battisti et al., 2018), and consequently, little is known about the impact of immigration in non-stationary environments or during the transition from steady-states.