Immigration and Secular Stagnation

Abstract

We examine the effect of immigration on the host-country economy in the dynamic model that can deal with secular unemployment. Immigration has contrasting effects, depending on the economic state of the host country. If it suffers from unemployment, an influx of immigrants worsens unemployment and decreases consumption by natives. If instead the host country has full employment, immigration boosts native consumption while maintaining full employment, provided that immigrants are not too numerous. An influx of too many immigrants however can trigger stagnation. We also find that immigrants’ remittances are harmful to natives under full employment but beneficial under secular stagnation.