The short-run effects of a large immigration wave: Spain 1998-2008

This paper investigates the effects of the large immigration wave experienced by Spanish regions in the period 1998-2008. We provide causal estimates of the effects of immigration on the main determinants of income and wages and simulate the response of Spanish regional economies to the immigration shocks in the data. We show that immigration is responsible for slower income per capita and labor productivity growth during this period. The main reason for the negative short-run effects that we find is that the short-run supply of capital is not perfectly elastic. Our findings also suggest that immigration may have induced a significant drop in unskilled wages but no effect on skilled wages in real terms. Intuitively, the previous capital-dilution effect is combined with an increase in the relative supply of unskilled labor. Author