Immigration and the Macroeconomy: Some New Empirical Evidence
47 Pages Posted: 27 Apr 2017
Date Written: April 27, 2017
We propose a new VAR identification scheme that enables us to disentangle immigration shocks from other macroeconomic shocks. Identification is achieved by imposing sign restrictions on Norwegian data over the period 1990Q1 - 2014Q2. The availability of a quarterly series for net immigration is crucial to achieving identification. Notably, immigration is an endogenous variable in the model and can respond to the state of the economy. We find that domestic labour supply shocks and immigration shocks are well identified and are the dominant drivers of immigration dynamics. An exogenous immigration shock lowers unemployment (even among native workers), has a small positive effect on prices and on public finances, no impact on house prices and household credit, and a negative effect on productivity.
Keywords: labour supply shocks, immigration shocks, job-related immigration, identification, VAR
JEL Classification: C11, C32, E32
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