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New Zealand experienced strong growth in immigration since the 1990s, until the COVID-19 pandemic triggered a two-year phase of near-zero migration. Growing concern about the impact of immigration on various social and economic outcomes has led to a review of the evidence and related policies. One area of concern is the extent to which immigration impacts on the distribution of income - given that inequality increased notably since the 1980s. In this paper we take into account that immigration is spatially selective and compare the contribution of migrant groups (including New Zealand born persons returning from abroad) to income inequality in metropolitan areas with that contribution in non-metropolitan urban areas. We use two different decomposition methods and compare results. We find with both methods that migrant groups made inequality-increasing contributions to overall income inequality. These contributions are larger in metropolitan areas than in other urban. However, changes in the skill distribution, including those brought about by immigration, have more important implications for the distribution of income. High-skilled groups (whether New Zealand born or foreign born) have made inequality-increasing contributions to the distribution of income, particularly in metropolitan areas.

International migration and income distribution in New Zealand metropolitan and non-metropolitan areas