Scandinavian Working Papers in Economics

Working Paper Series,
Sveriges Riksbank (Central Bank of Sweden)

No 405: Dynamic Macroeconomic Implications of Immigration

Conny Olovsson (), Karl Walentin () and Andreas Westermark ()
Additional contact information
Conny Olovsson: Research Department, Central Bank of Sweden, Postal: Sveriges Riksbank, SE-103 37 Stockholm, Sweden
Karl Walentin: Research Department, Central Bank of Sweden, Postal: Sveriges Riksbank, SE-103 37 Stockholm, Sweden
Andreas Westermark: Research Department, Central Bank of Sweden, Postal: Sveriges Riksbank, SE-103 37 Stockholm, Sweden

Abstract: International immigration flows are large, volatile and have recently increased. This paper is the first to study dynamic effects of immigration in a search and matching framework. To quantify general equilibrium effects, we use Swedish population registry data and productivity estimates from a matched employer-employee dataset. A refugee (economic) immigration shock yields large initial negative (positive) effects on GDP per capita and employment rates, several times larger than corresponding steady state effects, in line with the microdata. To alleviate the effects of a refugee shock, policies affecting structural unemployment are important, e.g., benefit cuts and increasing the speed of integration.

Keywords: Immigration; refugees; dynamics; search and matching.

JEL-codes: J21; J31; J61

Language: English

64 pages, First version: October 1, 2021. Revised: October 1, 2022. Earlier revisions: October 1, 2022.

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