Abstract :
This article unifies two approaches for identifying the welfare and wage effects
of immigration, one emphasizing the immigration surplus, the other stressing a
potential welfare loss due to a terms-of-trade effect. We decompose the native
welfare effect into a standard complementarity effect, augmented by a Stolper–
Samuelson effect, and a terms-of-trade effect.We illustrate the welfare and wage
effects of endogenous goods prices in a stylized-specific factors model. Finally, we
calibrate this model to a generic OECD economy and provide simulation results.
The key insight is that endogenous goods prices play a quantitatively important
role, sometimes even overturning received results.
