Prices and Immigration: Firm-level Evidence

This paper investigates how immigration affects consumer prices. Using scanner data and instrumenting county-level immigration with historical ancestry patterns, we find that an inflow of 10,000 immigrants lowers four-year price growth by 0.58 percentage points. Leveraging variation in firm exposure through sales versus production locations, we show price declines stem entirely from the product demand channel: firms lower prices in response to immigrants in sales markets, not production locations. Evidence suggests that immigrants search more intensively, exhibit higher demand elasticity, pay lower prices for identical products, and shift expenditure toward lower-appeal products—consistent with a model of heterogeneous price sensitivity.