Empirical work using spatial wage-curve equations for Spain estimates the effect of immigration on average wages across NUTS-3 provinces and finds a small negative total effect that is mainly driven by spillovers from neighbouring provinces; a 2025 extension confirms this result with a novel internal-migration-based spatial weights matrix and shows the effect vanishes for high-skilled immigrants. What remains unresolved is whether this small provincial average masks heterogeneous impacts across the wage distribution, skill groups, and occupations, and how the magnitude and spatial localization of direct and spillover effects change when measured at sub-provincial spatial units rather than provinces. Answering this requires individual-level or highly disaggregated wage data combined with an econometric framework that handles spatial dependence, endogenous immigrant location choices, and the modifiable areal unit problem.

Background

A wage curve is the empirical negative relationship between the level of wages and the local unemployment rate; wage-curve equations augmented with an immigration variable and spatial lags are used to study how immigration affects pay. Gutiérrez-Portilla, Villaverde, Maza and Hierro (Regional Studies, 2020) estimate a spatial panel Durbin model — a panel regression that includes spatially weighted lags of both the dependent variable (wages in neighbouring units) and the explanatory variables — for 46 Spanish NUTS-3 provinces (NUTS-3 are the Spanish provinces in the EU Nomenclature of Territorial Units for Statistics) over 2004–15. They find a small negative effect of immigration on average wages that is mainly determined by indirect (spillover) effects running across provincial borders. This contrasts with earlier Spanish evidence from national skill-cell approaches, which classify workers by education-and-experience cells (Carrasco, Jimeno and Ortega, 2008) or schooling groups (González and Ortega, 2011) and find negligible wage effects, and with Atienza-Montero and Romo-Calixto (2021), who likewise report near-zero effects for 2009–2018. For the United Kingdom, Dustmann, Frattini and Preston (2013) showed that immigration can have effects of opposite sign at different points of the wage distribution, a distributional perspective that has never been applied to Spain. Two limitations of the Spanish spatial studies are acknowledged by their own authors. First, they model only the average provincial wage, so nothing is known about effects on specific wage ranges, skill groups, or occupations; the original authors note that their average result might be masking a significant effect of immigration on specific wage ranges and/or activities and flag this as a topic for further research if data are available. Second, the analysis is conducted at the province level although the authors note — citing evidence that labour-market spillovers arise at a very local level — that more disaggregated or internally homogeneous analytic regions would be preferable to avoid the modifiable areal unit problem (MAUP), the sensitivity of spatial-analysis results to the arbitrary spatial units at which data are aggregated. The 2025 follow-up by Maza and Hierro (National Accounting Review) extends the framework to 2006–2021 with a spatial weights matrix built from internal-migration-flows rather than geographic distance and with two variables measuring immigrants' human capital; it confirms a small negative total effect (roughly a 2.7% wage decline for a 10% rise in immigration, with robustness estimates between 1.8% and 4.2%) that disappears for high-skilled immigrants, and it subjects the results to a battery of alternative weight matrices, lag structures, and sample periods. Yet that study remains at the provincial-average level; it notes that its macroeconomic approach does not provide the means for a detailed exploration of the mechanisms through which immigration affects wages and that its results do not provide detailed information on the particular effects on specific population groups or worker profiles, and it lists microdata-based analysis (e.g., using the OECD PIAAC database), substitution between native workers and low-skilled immigrants, and heterogeneity across industries and provinces as future-research directions, while distributional and finer-scale estimation were not undertaken there.

Problem Statement

Using individual-level wage data or wage data at sub-provincial spatial units for Spain, determine whether the small negative effect of immigration on average provincial wages masks heterogeneous effects across the wage distribution — across wage quantiles, skill groups, and occupations — and quantify how the magnitude, sign, and spatial localization of the direct and spillover effects of immigration on wages change when the analysis is conducted at municipality-level or internally homogeneous analytic regions rather than NUTS-3 provinces. A complete answer comprises the source's two separately flagged open directions: (i) estimate immigration effects at points of the native wage distribution and across skill/occupation groups, not only the mean, within a framework that handles spatial dependence among units and the endogeneity of immigrants' location choices; and (ii) establish the sensitivity of the direct/indirect effect decomposition to the spatial scale of analysis, thereby assessing the modifiable areal unit problem that motivated the question.

References

  1. Gutiérrez-Portilla, M., Villaverde, J., Maza, A., & Hierro, M. (2020). A spatial approach to the impact of immigration on wages: evidence from Spain. Regional Studies, 54(4), 505–514. DOI: 10.1080/00343404.2018.1424994. https://doi.org/10.1080/00343404.2018.1424994
  2. Maza, A., & Hierro, M. (2025). A regional macroeconomic approach to the link between immigration and wages in Spain: New insights from a spatial econometric perspective. National Accounting Review, 7(2), 177–195. DOI: 10.3934/nar.2025008. https://doi.org/10.3934/nar.2025008
  3. Carrasco, R., Jimeno, J. F., & Ortega, A. C. (2008). The effect of immigration on the labor market performance of native-born workers: some evidence for Spain. Journal of Population Economics, 21(3), 627–648. DOI: 10.1007/s00148-006-0112-9. https://doi.org/10.1007/s00148-006-0112-9
  4. González, L., & Ortega, F. (2011). How do very open economies adjust to large immigration flows? Evidence from Spanish regions. Labour Economics, 18(1), 57–70. DOI: 10.1016/j.labeco.2010.06.001. https://doi.org/10.1016/j.labeco.2010.06.001
  5. Dustmann, C., Frattini, T., & Preston, I. P. (2013). The effect of immigration along the distribution of wages. The Review of Economic Studies, 80(1), 145–173. DOI: 10.1093/restud/rds019. https://doi.org/10.1093/restud/rds019
  6. Atienza-Montero, P., & Romo-Calixto, C. E. (2021). El efecto de la población inmigrante sobre el empleo y salarios de los trabajadores nativos. Una investigación empírica para España, 2009–2018. Estudios de Economía Aplicada, 39(2). DOI: 10.25115/eea.v39i2.3706. https://doi.org/10.25115/eea.v39i2.3706
  7. Fusaro, S., & López-Bazo, E. (2025). Geographic differences in the effect of immigration on the native wage distribution: Evidence from Italian provinces. Journal of Regional Science, 65(2), 313–323. DOI: 10.1111/jors.12742. https://doi.org/10.1111/jors.12742