The economics of Canadian immigration levels

Abstract

If immigration can benefit the Canadian economy, but must be limited to realize the benefit, what is the optimal level? The Canadian government is increasing immigration rates to levels not reached since the 1920s in the hope of addressing labour shortages and sluggish economic growth. We argue that economic immigration in the Canadian context should aim to raise GDP per capita in the population, including the newcomers, and examine the potential for increases in Canadian immigration rates to achieve this objective. Our analysis suggests that Canada is not well positioned to leverage heightened immigration to increase GDP per capita owing primarily to weak capital investment and quantity–quality tradeoffs in immigrant selection. We propose a policy rule for defining the optimal level of economic immigration.