The macroeconomic effects of immigration: Israel in the 1990s

The authors perform counterfactual simulations using an econometric model to estimate the macroeconomic effects of immigration in Israel. The model takes account of immigrant assimilation in labor and housing markets. They argue that wage flexibility was the key to success in immigrant absorption. In addition, the animal spirits of entrepreneurs consolidated this success. House prices, GDP, consumption, investment, unemployment and imports would have been considerably lower but for the immigration, while real wages would have been higher. The main beneficiaries were capitalists owning housing and businesses. The main losers were workers who were not owner-occupiers.