The Impact of Immigration on the Well-Being of Natives

Abstract

Combining data from the German Socio-Economic Panel for 1998–2009 with local labor market information, this is the first paper to investigate how the spatial concentration of immigrants affects the life satisfaction of the native Germans. Our results show a positive and robust effect of immigration on natives’ well-being, which is not driven by local labor market characteristics. Immigration has only a weak impact on the subjective well-being of immigrant groups, meanwhile. We also examine potential threats to causality and conclude that our findings are not driven by selectivity and reverse causality. Specifically, natives are not crowded out by immigrants and the sorting of immigrants to regions with higher native happiness is negligible. We further find that the positive effect of immigration on natives’ life satisfaction is a function of the assimilation of immigrants in the region. Immigration's well-being effect is higher in regions with intermediate assimilation levels and is essentially zero in regions with no or complete assimilation.