The impact of immigration on the well-being of natives

• We examine the effect of immigration on the happiness of natives using panel data from Germany.
• Immigration is found to increase happiness in the region.
• Findings are neither driven, nor strongly influenced by reverse causality, selectivity and confounding local labour market attributes.
• The impact of immigration depends on the level of assimilation of immigrants in the region.
• The satisfaction domains that seem to be particularly affected by immigration are “dwelling” and “leisure”.

Combining data from the German Socio-Economic Panel for 1998–2009 with local labor market information, this is the first paper to investigate how the spatial concentration of immigrants affects the life satisfaction of the native Germans. Our results show a positive and robust effect of immigration on natives’ well-being, which is not driven by local labor market characteristics. Immigration has only a weak impact on the subjective well-being of immigrant groups, meanwhile. We also examine potential threats to causality and conclude that our findings are not driven by selectivity and reverse causality. Specifically, natives are not crowded out by immigrants and the sorting of immigrants to regions with higher native happiness is negligible. We further find that the positive effect of immigration on natives’ life satisfaction is a function of the assimilation of immigrants in the region. Immigration's well-being effect is higher in regions with intermediate assimilation levels and is essentially zero in regions with no or complete assimilation.