IMF Working Papers

Immigration and Local Inflation

By Philip Barrett, Brandon Tan

January 10, 2025

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Format: Chicago

Philip Barrett, and Brandon Tan. "Immigration and Local Inflation", IMF Working Papers 2025, 005 (2025), accessed April 21, 2025, https://doi.org/10.5089/9798400296635.001

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Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

We use a shift-share approach to estimate the impact of inward immigration on local inflation in the United States. We find that a higher rate of immigration reduces inflation, lowering it by about 0.1 to 0.2 percentage points following a doubling of immigration. Higher immigration flows also lower local goods inflation, increase local housing and utilities inflation, and have no statistically significant impact on inflation in other services. Effects are approximately two and three time larger for working age and low-education immigrants. We do not detect a statistically significant impact of more educated immigrants on overall inflation, but they do increase local housing inflation. Our results can be jointly rationalized by a simple general equilibrium model where the substitutability of capital and labor varies across industries but capital is fixed in the short run.

Subject: Education, Housing, Inflation, Labor, Labor supply, Migration, National accounts, Population and demographics, Prices

Keywords: Caribbean, Goods inflation, Housing, Housing inflation, Immigration, Inflation, Inflation in the United States, Labor supply, Migration, Price level, Utilities inflation

Publication Details

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