Does Immigration Affect the Phillips Curve?: Some Evidence from Spain Articles uri icon

publication date

  • November 2008

start page

  • 1398

end page

  • 1423

issue

  • 8

volume

  • 52

international standard serial number (ISSN)

  • 0014-2921

electronic international standard serial number (EISSN)

  • 1873-572X

abstract

  • The Phillips curve has flattened in Spain over 1995&-2006: Unemployment has fallen by 15 percentage points, with roughly constant inflation. This change has been much more pronounced than elsewhere. We argue that this stems from the immigration boom in Spain over this period. We show that the New Keynesian Phillips curve is shifted by immigration if natives' and immigrants' labor supply elasticities and bargaining power differ. Estimation of this curve for Spain indicates that the fall in unemployment since 1995 would have led to an annual increase in inflation of 2.5 percentage points if it had not been largely offset by immigration.