Abstract
The growing inflow of immigrants to Western Europe and the US has increased the importance of understanding immigrants’ location decisions within their host country. While this decision is shaped by many factors, the focus of the thesis is on the effect of the local public sector. A common approach in the literature has been to use public spending as a proxy for the level of local public services. However, such a variable is endogenous because of unobserved variations in service production cost across regions. The exogenous variation in municipal revenues in Norway allows to use an instrumental variable approach to overcome endogeneity issue. Using the change in immigrant stocks between 2005 and 2015 as a dependent variable, the results suggest that on average the effect of local public services on immigrant location is zero, however there is an indication of some positive effect for municipalities with significantly high level of income.