Working Paper

Immigration and the macroeconomy: some new empirical evidence

Author: Francesco Furlanetto and Ørjan Robstad
Series: Working Paper
Number: 18/2016

Working Paper 18/2016 (PDF 1.7 Mb)

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 labor 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 positive effect on prices and on public finances in the medium run, no impact on house prices and household credit, and a negative effect on productivity.

Published 24 November 2016 10:40