Immigration and the Macroeconomy: Some New Empirical Evidence

47 Pages Posted: 27 Apr 2017

Multiple version iconThere are 2 versions of this paper

Date Written: April 27, 2017

Abstract

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

Suggested Citation

Furlanetto, Francesco and Robstad, Ørjan, Immigration and the Macroeconomy: Some New Empirical Evidence (April 27, 2017). Banco de Espana Working Paper No. 1716. Available at SSRN: https://ssrn.com/abstract=2959353 or http://dx.doi.org/10.2139/ssrn.2959353

Francesco Furlanetto (Contact Author)

Norges Bank ( email )

P.O. Box 1179
Oslo, N-0107
Norway

Ørjan Robstad

Norges Bank ( email )

P.O. Box 1179
Oslo, N-0107
Norway

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