Does Immigration Affect the Phillips Curve? Some Evidence for Spain

Bentolila, Samuel; Dolado, Juan Jose; Jimeno, Juan F.

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Does Immigration Affect the Phillips Curve? Some Evidence for Spain

CEPR Discussion Paper No. DP6604

47 Pages Posted: 9 Jun 2008

See all articles by Samuel Bentolila

Samuel Bentolila

Centro de Estudios Monetarios y Financieros (CEMFI); Centre for Economic Policy Research (CEPR); CESifo (Center for Economic Studies and Ifo Institute)

Juan Jose Dolado

Charles III University of Madrid - Department of Economics; Centre for Economic Policy Research (CEPR); Institute for the Study of Labor (IZA); CESifo (Center for Economic Studies and Ifo Institute)

Juan F. Jimeno

Banco de España - Research Department; Centre for Economic Policy Research (CEPR); IZA Institute of Labor Economics

There are 4 versions of this paper

Date Written: December 2007

Abstract

The Phillips curve has flattened in Spain over 1995-2006: unemployment has fallen by 15 percentage points, with roughly constant inflation. This change has been more pronounced than elsewhere. We argue that this stems from the immigration boom in Spain over this period. We show that the New Keynesian Phillips curve is shifted by immigration if natives' and immigrants' labour supply or bargaining power differ. Estimation of the curve for Spain indicates that the fall in unemployment since 1995 would have led to an annual increase in inflation of 2.5 percentage points if it had not been largely offset by immigration.

Keywords: Immigration, Phillips curve

JEL Classification: E31, J64

Suggested Citation: Suggested Citation

Bentolila, Samuel and Dolado, Juan Jose and Jimeno, Juan F., Does Immigration Affect the Phillips Curve? Some Evidence for Spain (December 2007). CEPR Discussion Paper No. DP6604, Available at SSRN: https://ssrn.com/abstract=1140533