The Labor Supply Curve Is Upward Sloping: The Effects of Immigrant-Induced Demand Shocks

Authors

Sigurd Galaasen, Norges Bank
Andreas Kostøl, BI Norwegian Business SchoolFollow
Joan Monras, UPF, CREI, BSE, and CEPRFollow
Jonathan Vogel, UCLA and NBER

Publication Date

6-24-2025

Series

Upjohn Institute working paper ; 25-419

DOI

10.17848/wp25-419

Abstract

What is the effect of immigration on native labor-market outcomes? An extensive literature identifies the differential impact of immigration on natives employed in jobs that are more exposed to immigrant labor (supply exposure). But immigrants consume in addition to producing output. Despite this, no literature identifies the impact on natives employed in jobs that are more exposed to immigrant consumption (demand exposure). We study native labor market effects of supply and demand exposures to immigration. Theoretically, we formalize both measures of exposure and solve for their effects on native wages. Empirically, we combine employer-employee data with a newly collected data set covering electronic payments for the universe of residents in Norway to measure supply and demand exposures of all native workers to immigration induced by EU expansions in 2004 and 2007. We find large, positive, and persistent effects of demand exposure to EU expansion on native worker income.

Issue Date

June 2025

Note

Upjohn project #58158

Sponsorship

W.E. Upjohn Institute for Employment Research Early Career Research Award No. 20-158-10, Norwegian Research Council, Fundacion BBVA Beca Leonardo, and Spanish Ministry of Economy and Competitiveness through the Severo Ochoa Programme for Centres of Excellence

Subject Areas

LABOR MARKET ISSUES; INTERNATIONAL ISSUES; Immigration