The Economic Ripple Effects of Mass Deportations

By Javier Cravino, Andrei A. Levchenko, Francesc Ortega and Nitya Pandalai-Nayar

The U.S. is in the midst of an unprecedented wave of deportations. Between January and July 2025, nearly 150,000 individuals were deported, and the provision of a total of $170 billion in new federal funding for immigration enforcement suggests these efforts will continue. This raises several key economic questions and concerns: How will this policy reshape the economy? Will consumer prices of everyday items such as food soar? Will American workers benefit?

In new research, we quantify the economic consequences of large-scale deportations using fresh data on workers’ legal status combined with a rich, multi-region, multi-sector quantitative model of the U.S. economy with heterogeneous workers.

Where unauthorized workers are concentrated

We use a novel algorithm to impute the legal status of foreign-born workers in the American Community Survey (ACS). Importantly, our approach accounts for migrant arrivals in 2024, and distinguishes between workers with temporary work authorizations (TPS, DACA, parole, asylum seekers), and workers fully unauthorized to live and work in the US. Our analysis focuses on this latter group only, though our model can be used to study other policies affecting the temporary work authorization group as well. Unauthorized immigrants make up about 3% of the U.S. workforce, but their presence is far from uniform:

• By state: California, Texas, Nevada, New Jersey, Washington and Florida each have around 5–6% of their workforces unauthorized. In contrast, states like Montana and West Virginia have negligible shares.
• By industry: Farming stands out, with more than one-third of workers unauthorized. Construction, Food & Drink Services, and Forestry & Fishing also rely heavily on this labor.
• By occupation: Farmers, construction workers, and personal service providers (such as cleaning and yard work) have some of the highest shares of unauthorized workers.

Figure 1: (adapted from Figures 1,2 and 3 of our paper) Shares of unauthorized workers across states, industries, and occupations.

States

Industries

Occupations

What happens when deportations rise?

Using a stylized version of our model, we show analytically that native workers’ (US born and naturalized citizens’) average real wages fall in all regions in response to deportation shocks. Analytically, the fall is in proportion to the initial presence of unauthorized workers in the geographic location. However, despite this overall decline, native wages in some immigrant-intensive occupations may increase if native and foreign-born workers are sufficiently substitutable. Finally, the removal of unauthorized workers raises the relative prices of immigrant-intensive sectors, in proportion to how much labor these sectors use in producing output, and to the share of unauthorized workers in these sectors’ wage bills.

 We then calibrate our full model with standard parameter estimates. We match the shares of native, authorized and unauthorized workers across states, sectors and occupations, as well as national sectoral expenditures and intra-region and international trade flows.  We simulate the removal of 50% of unauthorized workers nationwide – about 1.5% of the workforce. While the shock is aggregate, the impact is heterogeneous across regions, sectors and occupations, as the distribution of unauthorized workers varies at this granular level. The results validate our analytical results, and challenge some conventional expectations:

1. Native workers lose overall, but average real wage declines are modest

We find average real wages for natives fall by 0.3% nationally and fall in every state. The declines are steepest in California, Washington, New Jersey, and Texas (−0.4 to −0.5%). But, as predicted by the theory, not all natives lose: those in immigrant-heavy jobs, like farming, see wage increases of as much as 3–7%.

Figure 2: (adapted from Figure 4 of our paper) Native wage changes by state and occupation.

2. Immigrant workers gain

Authorized immigrants experience a 3% increase in real wages. Unauthorized immigrants who remain in the country see the biggest gains—12% on average— due to their relative scarcity and low occupational substitutability with other categories of workers.

3. Prices rise in certain sectors, but modestly in most

Sectors most exposed to the shock see modest price increases. For instance, farm goods become 1.6% more expensive relative to the overall price index. Forestry & Fishing see similar increases, while most other sectors show little change. Consumer prices overall rise by less than producer prices, as intra and international trade and substitution towards less affected regions cushions the consumer price impact.

Figure 3: (adapted from Figure 6 of our paper) Producer and consumer price changes by sector.

Who bears the burden?

We find the cost-of-living impact is uneven. States with larger shares of unauthorized workers (California, Washington, Texas, New Jersey, Florida) face consumer prices 0.2–0.3% above the national average, while states with minimal exposure (North Dakota, West Virginia) see relative price declines. The gap between the most and least exposed states is around 0.7%.

It is well known that lower-income households have larger expenditure shares on staples like food items, which are sectors seeing relatively larger price increases from the policy. As expected, looking across households, deportations are slightly regressive. Lower-income households—who spend a larger share on food—face somewhat higher price increases than wealthy households. Yet the gap is limited: just 0.02 percentage points between the bottom and top 5% of earners. This reflects both the size of relative consumer price increases by sector: the most affected sectors see modest price increases, and the insufficiently large gap in expenditure shares on these sectors between the top and bottom earning households.

Figure 4: (adapted from Figures 8 and 9 of our paper) Regional and household variation in consumer price changes.

Regional Consumer Price Variation

CPI of top 5% vs bottom 5%

Bottom line

Large-scale deportations redistribute income in ways that are not always intuitive. They hurt the majority of U.S. households due to slightly higher living costs. These costs are borne disproportionately by regions with a higher initial share of immigrant workers. The primary beneficiaries of these policies are concentrated in the few native workers in the most impacted occupations like farming or construction, authorized workers, and the unauthorized immigrant workers remaining in the US.

This article is based on the paper, “The Economic Impact of Mass Deportations”, EMPCT Working Paper 2025-09

Note: The views expressed herein are solely those of the authors and should not be reported as representing the views of the institutions they are associated with. They also do not necessarily represent the views of the University of Texas at Austin.