Immigration, Economic Growth and Unemployment in Greece: An Application of the ARDL Bounds Testing Approach to Cointegration

Abstract

This study aims at investigating the nature of the causal relationship between immigration and two macroeconomic indicators, GDP per capita and unemployment, in Greece using annual data spanning the period between 1980 and 2007. Procedures are used to endogenously identify structural breaks in these macroeconomic series and then to incorporate these breaks in unit root tests. Taking into account the resulting endogenously determined structural breaks the error correction version of the ARDL procedure is then employed, to specify the short- and long-term determinants of economic growth in the presence of structural breaks. Results of the ARDL bounds test are supportive of the theory that the variables are in a long-run equilibrium level relationship. On the other hand, results of the Granger-causality tests support the existence of a long-run, bidirectional causality between immigration and GDP per capita. However, in the short run, the results are indicative of unidirectional causality running from immigration to GDP per capita. Furthermore, in the short-run, the results do not support the hypothesis that immigration causes unemployment. On the contrary, evidence suggests that unemployment causes immigration.