The Impact of Immigration on Income Inequality : Evidence from Sweden and the United States

Abstract: This paper studies data from a 25-year period in the history of Sweden and the US, ranging from 1993 to 2017. The aim of the thesis was to investigate the impact of immigration on the income inequality of the respective countries while also considering the impact of other specific variables. In order to estimate the impact of the variables, both static and dynamic models were used, with the Gini coefficient being the dependent variable. With the ordinary least square giving short-run estimates and the error correction model providing short- and long- run estimates simultaneously, the main variable for immigration, being the foreign-born population, showed a strong positive relationship with income inequality. For the estimation, the immigration variable was also split into high- and low-skilled immigrants as well as different age groups. In conclusion, we find that immigration in Sweden and the US has high levels of influence on the income inequality for both countries.