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Relaxing Immigration Restrictions in a Peripheral Region: Evidence from Finnish North Karelia

Author

Listed:
  • Ohto Kanninen

    (Labour Institute for Economic Research LABORE)

  • Hannu Karhunen

    (Labour Institute for Economic Research LABORE)

  • Sanni Kiviholma

    (Labour Institute for Economic Research LABORE)

  • Jeremias Nieminen

    (Labour Institute for Economic Research LABORE)

Abstract

Several countries use immigration liberalization as a place-based policy tool, but evidence on its regional effects remains almost entirely descriptive. We examine the causal impact of removing labor market testing (LMT) regulations for labor immigrants in all occupations in the remote Finnish region of North Karelia. The reform allowed firms to hire non-EU foreign workers in all occupations without first advertising jobs to domestic applicants, resulting in a 14% rise in the stock of immigrant workers. Using synthetic control and difference-in-differences methods, we estimate causal effects of the reform at the regional, municipal, firm establishment, and individual levels. The reform caused immigrant inflows to increase primarily in cities and in specific types of occupations, i.e., low-paying occupations and ISCO groups 5, 7, 8, and 9. Across the firm size distribution, the increases concentrate around the median and the top. We find little evidence that the policy had meaningful effects on other regional or municipal outcomes: immigration liberalization boosted labor supply without generating transformative medium-term regional effects.

Suggested Citation

  • Ohto Kanninen & Hannu Karhunen & Sanni Kiviholma & Jeremias Nieminen, 2026. "Relaxing Immigration Restrictions in a Peripheral Region: Evidence from Finnish North Karelia," Working Papers 365, Työn ja talouden tutkimus LABORE, Labour Institute for Economic Research LABORE.
  • Handle: RePEc:pst:wpaper:365
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    Keywords

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    JEL classification:

    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
    • R58 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Regional Development Planning and Policy
    • J20 - Labor and Demographic Economics - - Demand and Supply of Labor - - - General
    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy
    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers
    • J68 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Public Policy

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