A regional macroeconomic approach to the link between immigration and wages in Spain: new insights from a spatial econometric perspective

Abstract

Using an extended spatial wage equation that introduces novel elements in the weight matrix and the treatment of immigrants' human capital, we analyzed the impact of immigration on wages. Examining the Spanish case at the provincial level as a sort of laboratory over the period 2006-2021, the results indicated a small, negative effect that disappears when immigrants are highly skilled. Furthermore, the empirical evidence does not support an association between the unemployment rate and wages, confirming that Spain's well-known high degree of wage rigidity persisted in the aftermath of the financial and economic crisis of 2008. Our results are shown to be robust across a battery of tests that assess their reliability from different perspectives.