Winners and losers of immigration

We aim to identify winners and losers of a sudden inflow of low-skilled immigrants using a general equilibrium search and matching model in which employees, either native or non-native, are heterogeneous with respect to their skill level and produce different types of goods and Government expenditure in public goods is financed by a progressive taxation on wages and profits. We estimate the short-term impact of this shock for Italy in each year in the period 2008-2017 to be sizeable and highly asymmetric. In 2017, the real wages of low-skilled and high-skilled employees were 4% lower and 8% higher, respectively, compared to a counter-factual scenario with no non-natives. Similarly, employers working in the low-skilled market experienced a drop in profits of comparable magnitude, while the opposite happened to employers operating in the high-skilled market. Finally, the presence of non-natives led to a 14% increase in GDP and to an increment of approximately 70 billion euros in government revenues and 18 billion euros in social security contributions.