Immigration and House Prices in Sweden

University essay from Lunds universitet/Nationalekonomiska institutionen

Abstract: Over the last two decades Sweden became one of the European countries with the highest levels of immigration. About the same time the country experienced a substantial boom in house prices. Since many analysts view a housing shortage as the main driver for the increase in prices it seems natural to ask if immigration has the potential to accelerate prices in the housing market. This paper analyses the nexus between immigration and house prices for the period between the years 2000 and 2016. Based on a newly compiled panel data set, I analyse 286 Swedish municipalities by the means of a fixed effects regression model. To account for possible endogeneity, I present a strategy to apply the widely used shift-share methodology. The results show that a 1% increase in population from immigration is associated with a rise in purchase prices for housing between 0.7 and 1.8 % in Swedish municipalities. These results are supported by an extensive number of robustness checks. The findings from this study have relevant implications for Swedish policy makers, especially when considering that immigration levels are expected to stay on a high level in the foreseeable future.

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