How immigration affects the labor market of the host country is a topic of major concern for many immigrant-receiving nations. Spain is no exception following the rapid increase in immigrant flows experienced over the past decade. We assess the impact of immigration on national income in Spain by estimating the net immigration surplus under the assumptions of both perfect and imperfect substitutability of immigrant and native labor of similar educational attainment and work experience. In the latter case, we use information on the occupational distributions of immigrants and natives of different education-age groups to develop a mapping of immigrant-to-native skills that reveals the combination of natives of distinct education-age cells equivalent to an immigrant in a given education-age cell. We then use the information on the immigrant-to-native occupation or skill correspondence to account for the imperfect substitutability between immigrant and native labor within education-age cells. The results show that the magnitude of the immigration surplus significantly rises with the size of the immigrant population and, in particular, with the imperfect substitutability between immigrant and native labor.

JEL Classification: J61, F22
Keywords: Immigration surplus, imperfect substitutes, Spain.