The Political Economy of Immigration and Welfare State Effort: Evidence from Europe 29 For Table 2.7, the instruments that are used are 7- and 8-year lags of the foreign-born population. For an IV regression it is not uncommon to use earlier years of the independent variable as instruments. The logic is that previous years’ levels of the foreign-born population provide a strong predictor of future years’ levels of the foreign-born population and thus satisfy the relevance criteria11. Next, the years are considered to be far enough back in time that the levels in those years are highly unlikely to directly influence current levels of social spending and generosity, thus satisfying the exogeneity criteria12. Columns 1 and 2 in Table 2.7 show the IV regressions for the original model specifications. The results hold, the foreign-born population is positive and statistically significant, while there is no association with the generosity index. The crucial change is that the magnitude of the coefficient for foreign-born is larger. However, taking lagged levels of the foreign-born variable as instruments means that the number of observations greatly reduces. For spending though, a much larger sample is available as the OECD provides spending and migration data for more European countries over a longer period of time. In the original spending estimation, the sample is restricted to the countries and date range found in CWED in order to directly compare spending and generosity. Subsequently for the IV regression, the sample for spending is expanded to include more years in column 3, and then more countries13 in Column 4. This expansion means that the results incorporate observations following the last round of EU enlargement and the last of the labour market restrictions on Bulgarians and Romanians have been lifted. In light of an expanded sample, the results for foreign-born remain statistically significant and positively associated with social welfare spending and provide support to the theory that the globalisation of migration is associated with compensatory effects. 11 The first stage F-statistic is 43.45. 12 The Sargan-Hansen test of over-identifying restrictions confirms the validity of the instruments. 13 Czech Republic, Estonia, Hungary, Iceland, and Luxembourg.
RkJQdWJsaXNoZXIy MjY0ODMw