Bivariate Causality Between Immigration and Long-Term Unemployment in Australia, 1981-1998

Abstract:     
This paper is concerned with the possible bivariate Granger causality between immigration, measured as the proportion of net permanent and long-term movement to resident population, and long-term unemployment, measured as the proportion of long-term unemployed to total unemployed, in Australia in the period of 1981 to 1998. Using quarterly, both seasonally unadjusted and adjusted data, first we try to determine whether these series are stationary or have nonseasonal and/or seasonal unit roots. After having established the univariate properties of these series we focus on the possibility of common features, such as common trend and seasonality. Finally, we test for causality. Our final conclusion is that there is unidirectional Granger causality, both between the seasonally unadjusted and adjusted series, running from immigration to long-term unemployed in the future. This relationship is negative, i.e., more migrants mean relatively less long-term unemployed in the future. Although, as regards causality, the analysis of both the seasonally unadjusted and adjusted data led to the same conclusion, it is also apparent from our study that seasonal adjustment might significantly affect the outcomes of hypothesis tests for unit root and stationarity.

Keywords: Causality, immigration, unemployment, Australia

JEL Classifications: C12, C22, J61, J64

Working Paper Series