An empirical study on the macroeconomic effects of immigration

Abstract

In this paper, we study the macroeconomic effects of an immigration shock in Sweden, using a Structural Autoregressive (SVAR) model with sign restrictions. We find that labor immigration increases output, participation and immigration, leave real wages unaffected and lowers unemployment (even among native workers). We also compare our results for Sweden to the same analysis done by Furlanetto and Robstad (2019) for Norway. The results are generally similar, suggesting that labor immigration to Norway and Sweden leads to some of the same macroeconomic responses. However, we find that the immigration shock is more persistent in Norway. Also, unemployment reacts differently to an immigration shock in Norway, as it is less cyclical and volatile than in Sweden.