How Does Immigration Impact Output, Employment and Wages? Evidence from United Kingdom

Abstract

This study investigates the impact of immigration on the UK economy using time-series data from 1975 to 2006 and panel data of 12 regions from 2002 to 2006. This study was conducted in 2008 when there was a national debate going on whether the immigration impacted the economy positively or negatively. A rigorous econometric exercise has been done in both time-series and panel models. Results found from various estimation techniques predominantly show immigrants to be contributing to increasing GDP, reducing unemployment and increasing wages. Granger non-causality test confirms immigrants’ role in causing economic growth of this country to rise. Tests do not show any long-run relationship between GDP and immigration share. No significant impulse is created in GDP, wage rate or unemployment rate in response to any shock taking place in the immigration share of this country according to the datasets used in this study.