September 2019

IZA DP No. 12642: Not Just a Work Permit: EU Citizenship and the Consumption Behavior of Documented and Undocumented Immigrants

This paper explores the impact of the 2007 EU enlargement on the consumption behavior of immigrant households. Using data from a unique Italian survey and a diff-in-diff approach, we find that the enlargement induced a consumption increase for immigrants from new member states. This effect concerned both undocumented and documented immigrants, albeit through different channels. Detailed information on immigrants' legal status and sector of employment allows us to shed light on the exact mechanisms. Following the enlargement, previously undocumented immigrants experienced increases in labor income by moving away from the informal sector, whereas immigrants who were already working legally in Italy benefitted from an increased probability of getting permanent contracts. Enhanced employment stability in turn reduced uncertainty, leading to an increase in documented immigrants' consumption.