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Immigration and the distribution of income, consumption and wealth in the euro area: Implications for economic policies

Author

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  • Dossche, Maarten
  • Kolndrekaj, Aleksandra
  • Propst, Maximilian
  • Ramos Perez, Javier
  • Slacalek, Jiri
  • Vegh, Marton

Abstract

We use representative data from household surveys in the euro area to describe differences in wages, income, consumption, wealth and liquid assets between households born in their country of residence (“natives”) and those born in other EU and non-EU countries (“immigrants”). The differences in wealth and liquid assets are more substantial than the differences in wages, income and consumption: immigrants earn on average about 30% lower wages than natives and hold roughly 60% less net wealth. For all variables, only a small fraction of differences between natives and immigrants—around 30%—can be explained by differences in demographics (age, gender, marital status, education, occupation, sector of employment). Immigrants are more likely to be liquidity constrained: while we classify 17% of natives as “hand-to-mouth” (they hold liquid assets worth less than two weeks of their income), the corresponding share is 20% for households born in another EU country and 29% for those born outside the EU. Employment rates of immigrants are substantially more sensitive to fluctuations in aggregate employment. We discuss the implications of these findings for economic policies, including monetary, fiscal and pre-distribution policies.

Suggested Citation

  • Dossche, Maarten & Kolndrekaj, Aleksandra & Propst, Maximilian & Ramos Perez, Javier & Slacalek, Jiri & Vegh, Marton, 2024. "Immigration and the distribution of income, consumption and wealth in the euro area: Implications for economic policies," Journal of Policy Modeling, Elsevier, vol. 46(5), pages 867-886.
  • Handle: RePEc:eee:jpolmo:v:46:y:2024:i:5:p:867-886
    DOI: 10.1016/j.jpolmod.2024.02.005
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    More about this item

    Keywords

    Migration; Inequality; Distribution of income and wealth;
    All these keywords.

    JEL classification:

    • J15 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Minorities, Races, Indigenous Peoples, and Immigrants; Non-labor Discrimination
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity

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