Abstract

This paper examines how immigration affects consumer prices through product demand and labor supply channels. Using scanner price data linked to producer locations and instrumenting immigration with historical ancestry patterns, we find that immigration reduces prices: a 10,000-immigrant increase lowers approximately 8% in the average price growth for consumer packaged goods, with disinflationary effects extending to non-durable goods broadly and a net negative effect on regional CPI despite housing rent increases. Exploiting firm-level variation in exposure through sales versus production locations, we show price declines stem entirely from the product demand channel. Immigrants engage in more intensive price search, leading firms to lower markups. A structural demand framework confirms that immigration increases demand elasticity and shifts consumption toward lower-appeal products, with minimal variety effects.