Macroeconomic Impacts of Canadian Immigration: Results from a Macro-Model (2012)

"The tinderbox of potential concerns on the part of immigrants from their lack of economic assimilation could turn into an inferno if it were also accompanied by negative reactions on the part of domestic-born Canadians if immigrants were having a negative impact on the labour market for domestic-born workers or on the macro-economy in general. The purpose of this paper is to examine whether there is such a negative effect."

The authors "use a macro-econometric forecasting model to simulate the impact on the Canadian economy of a hypothetical increase in immigration. Our simulations generally yield positive impacts on such factors as real GDP and GDP per capita, aggregate demand, investment, productivity, and government expenditures, taxes and especially net government balances, with essentially no impact on unemployment. This is generally buttressed by conclusions reached in the existing literature. Our analysis suggests that concern should be with respect to immigrants themselves as they are having an increasingly difficult time assimilating into the Canadian labour market, and new immigrants are increasingly falling into poverty...

The paper begins with a discussion of the theoretically expected impact of immigration on various dimensions of the domestic economy. The next section provides an illustrative review of the literature on the impact of immigration on labour markets and net fiscal balances involving the difference between expenditures and taxes. This is followed by a description of the macro-econometric forecasting model used to estimate the effects of immigration on the macro-economy in terms of outcomes such as real GDP and GDP per capita, unemployment, aggregate demand and especially for housing, investment, productivity, and government expenditures, taxes and net government balances. The paper concludes with a summary and discussion of the policy implications."

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