Francesco Furlanetto, Norges bank
"Immigration and the Macroeconomy: Some New Empirical Evidence"
We propose a new VAR identification scheme that enables us to disentangle immigration shocks from other macroeconomic shocks in a sign-restricted model estimated on Norwegian data over the period 1990Q1 - 2014Q2. 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 small positive effect on prices and on public finances, no impact on house prices and household credit, and a negative effect on productivity driven by a large decline in capital intensity.