Immigration Unemployment Relationship: The Evidence From Canada*

This paper examines the relationship between unemployment and immigration in Canada. The bi‐directional causality test finds no evidence of a significant effect of Canadian immigration on unemployment. Cointegration tests indicate that there is no observed increase in aggregate unemployment due to immigration in the long run. The results from the causality test based on the vector error correction model confirm that, in the short run, past unemployment does cause (less) immigration but not vice versa . There is also a long‐run positive relationship among per‐capita GDP, immigration rate and real wages. The results indicate that, in the short‐run, more immigration is possibly associated with attractive Canadian immigration policies, and in the long‐run, as the labour market adjusts, Canadian‐born workers are likely to benefit from increased migration.