Immigration, welfare, and inequality: How much does the labor market specification matter?

Frédéric Docquier, Bright Isaac Ikhenaode, Hendrik Scheewel

Research output: Contribution to journalArticlepeer-review


General equilibrium models are frequently used to estimate the effect of immigration on welfare and inequality in the host country. Existing studies differ in the way they formalize the labor market implications for natives, which in turn govern the strength of the other transmission mechanisms. To assess the extent to which the choice of the labor market specification influences the findings, we build an encompassing model that distinguishes between broad classes of individuals. We calibrate it for 20 selected OECD member states, and compare several specifications involving different assumptions on labor supply decisions, unemployment rates, and wage formation, as well as different calibration strategies. The size and the sign of the average welfare and distributional effects of immigration are robust to the labor market specification. Endogenizing unemployment and participation rates leads to slightly better welfare and distributional effects in most OECD countries but overall, adding margins of labor market adjustment barely affects the findings of models based on simpler assumptions.

Original languageEnglish
Pages (from-to)1315-1347
Number of pages33
JournalReview of International Economics
Issue number5
Publication statusPublished - Nov 2022

Bibliographical note

Funding Information:
information BELSPO, Grant/Award Number: BR/132/A4/BEL-Ageing; FNRS, Grant/Award Number: FRESH 33847523We thank two anonymous referees for their helpful comments and suggestions. We are also grateful to Lionel Artige, Michele Battisti, David de la Croix, Carmelo Parello, Alessandro Piergallini, Panu Poutvaara, Joe Tharakan as well as seminar and workshop participants at UCLouvain, Cesifo, Sapienza University of Rome, University of Lille for valuable remarks.


  • immigration
  • income inequality
  • labor force participation
  • search and matching
  • unemployment
  • welfare

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