Chapter 15. Immigration and the Distribution of Incomes

We review research on the impact of immigration on income distribution, surveying studies from a variety of countries. Immigration may affect the skill composition of a country's residents and also, by changing relative factor supplies, its relative factor prices. As background, we provide evidence on immigration to the OECD countries and compare the distribution of native and immigrant educational attainment; we also examine the compositional effects of these changes in the United States. We then discuss the economic theory of the impact of immigration on factor prices, emphasizing substitution and complementarity between natives and immigrants in the labor market. Next, we review research methodologies, including structural and natural experiment approaches, used to estimate the impact of immigration on the native income distribution. We follow by considering the evidence on these questions for several countries, and also examine the impact of emigration on income distribution in the source country.