Do “Immigrants Increase the Unemployment of US Citizens?” An Empirical Examination of Trump’s Campaign Rhetoric

Abstract

I analyze the relationship between immigration and the US economy, specifically, the effects on levels of GDP and unemployment. Employing data that spans the time period 1870 to 2015, and using estimation results from a Vector Error Correction Model (VECM) Granger causality/Block exogeneity Wald test (Enders, 2003), I find a long run equilibrium relationship between GDP, unemployment, and immigration inflows that can be specifically described as a bidirectional causality between GDP and immigration, and a unidirectional causality running from immigration to unemployment. Examination of the response of changes in GDP and unemployment levels to a onetime Cholesky innovations (shocks) in immigration, I observe a rise in GDP and a fall in unemployment level. While these observations are relevant for policy making, especially given the current effort to limit legal immigration to the US, I have yet to validate these observations by accounting for the breakdown of the immigrant population into broad geographic regions of their countries of origins, and skill levels, my conclusions should be considered preliminary.