Abstract

We build a multi-region, multi-sector and multi-skill theoretical model of labor markets to investigate the patterns of European workers’ sorting caused by immigration from outside the European Union. We find that extra-EU immigrants increase wage rates of the majority of natives across NUTS1 regions in Europe, although the overall level of income inequality increases (especially the between occupation component). The consequential sorting of native workers across regions and within occupations induced by immigration is of lesser importance for welfare effects. The largest part of native income gains generated by extra-EU immigration originates from across-occupation sorting of natives.