Series: Working Papers. 1716.
Author: Francesco Furlanetto and Ørjan Robstad.
Published in:
Review of Economic Dynamics, Volume 34, October 2019, Pages 1-19
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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 driversof immigration dynamics. An exogenous immigration shock lowers unemployment (evenamong 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.