Study: FSU immigrants lower prices of consumer goods

Aliya from wealthier countries such as the USA, Canada and France drives real estate prices up.

consumer biz 88 298 (photo credit: Ariel Jerozolimski)
consumer biz 88 298
(photo credit: Ariel Jerozolimski)
The shopping patterns of the country's more than one million Russian immigrants has contributed to lower consumer prices here, a new study revealed this week. The study, conducted by Prof. Saul Lach from the faculty of Economics at the Hebrew University in Jerusalem, examines the affect immigration has on the prices of consumer products, specifically reviewing the consumer trends among immigrants from the Former Soviet Union. "The study confronts the predictions of the perfectly competitive model - that an increase in demand leads to higher prices," Prof. Lach told The Jerusalem Post. "The study finds that immigration can lower the prices of food, clothing, furniture, and appliances and it can have a significant moderating effect on inflation." Immigration to Israel from the FSU increased dramatically in 1990, growing from about 1,500 immigrants a month in October 1989 to about 35,000 a month in December 1990. Prof. Lach's study reports that a 1.0 percent increase in the ratio of immigrants to natives in a city decreases prices by 0.5% on average, with the decrease especially influencing prices of vodka and pork, products that enjoy high demand among FSU immigrants. "Apparently, immigrants spend more time than veteran citizens in comparing prices. It might be because their budget is limited, because they have more time when they first arrive to search for the more profitable deal or maybe because they have not yet developed loyalty to specific types of brands," Prof. Lach said. "Whatever the reason is, this sort of consumers' behavior encourages the market to be more efficient and to lower their prices in order to make the new immigrants loyal costumers in the long run to a brand or a store." While Russian immigrants help maintain lower consumer prices, the study said that the recent wave of immigration from wealthier countries such as the USA, Canada and France has caused a sharp increase in the prices of the apartment market, leading to an increase in the price of other goods being sold in the area. "Anglo immigrants that come to Israel, arrive with a certain lifestyle and quality of life that they have been used to and that they try to maintain. Many times, in order to feel 'home away from home,' they purchase certain American brands and goods that are more expensive in general than the local brands. These goods constitute comfort food for them and that might lead to prices increase in some certain neighborhoods and areas where there are many Anglo immigrants," said Ilana Kidckel, a registered dietitian and a member at the AACI (The Association of Americans and Canadians in Israel).