In the UK we are currently paying twice as much as we could on imported goods such as coffee and bananas, and the underlying reason may be surprising to some.
Research on immigration and prices in the UK indicates that immigration reduces the average price growth of non-traded goods and services. Moreover, for goods and services produced with low wage, labour intensive technologies, immigration decreases the growth rate of prices. In particular, the paper shows that an increase in the immigrants-natives ratio of one percentage point would lead to a 0.2% decrease in prices of such services. This reflects the occupational distribution of recent immigrants, whereby they concentrate in low-wage occupations in labour intensive sectors.