Immigration, Growth and Unemployment: Panel VAR Evidence From Ε.U. Countries

Abstract

AbstractMigration is primarily propelled by economic and security considerations. As of 2021, the European Union (EU) housed 23.7 million non-EU citizens, emphasizing the crucial need to evaluate the economic ramifications of migration within the EU. This research seeks to scrutinize the impact of migration on economic development and unemployment across the 27 EU nations from 1990 to 2020, utilizing a PVAR model. The Pesaran CIPS test (2007) was employed for second-generation unit root testing, while cointegration was examined using the ARDL panel model. The ARDL panel model and error correction model were employed to assess causal relationships and their directions. Initial tests indicated that the fixed effects model was the most suitable, and there existed cross-sectional dependency and heterogeneity among EU countries. Furthermore, second-generation unit root tests indicated that the variables were integrated at order I(0) or I(1). The study’s findings demonstrate a significant positive correlation between both GDP per capita and the unemployment rate with the net migration rate to EU countries. Causal effects revealed a bidirectional long-term causal relationship between migration and unemployment, as well as a unidirectional long-term causal relationship between growth and migration, and growth and unemployment. Short-term Granger causality indicated a bidirectional causal relationship among all the variables under examination.