14:15 - 15:45
Immigration and Inequality: New Macroeconomic Evidence
In this paper, we reconsider the link between immigration and labor income inequality using detailed micro and macro data for Norway.
Immigration has increased substantially in Norway during the last 20 years in response to several European Union enlargements to Eastern European countries. At the same time, several measures of income inequality have started rising, although not as abruptly as in other developed economies. Our analysis is feasible since Norway is one of the few countries for which detailed data on net immigration at the quarterly frequency are available together with micro-data on labor earnings collected by the tax authority covering the population of Norwegian workers at monthly frequency since 1997. We estimate a Factor Augmented Vector Autoregression (FAVAR) model tailored to include cross-sectional data to disentangle immigration shocks from other shocks driving the business cycle. Our main result is that a positive immigration shock increases inequality substantially with the effect being driven mainly by rich workers benefiting disproportionately from the increase in migration.
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