Does Immigration Decrease Far-Right Popularity? Evidence from Finnish Municipalities

Across Europe, far-right parties have made significant electoral gains in recent years. Their anti-immigration stance is considered one of the main factors behind their success. Using data from Finland, this paper studies the effect of immigration on voting for the far-right Finns Party on a local level. Exploiting a convenient setup for a shift-share instrument, I find that one percentage point increase in the share of foreign citizens in municipality decreases Finns Party’s vote share by 3.4 percentage points. Placebo tests using pre-period data confirm this effect is not driven by persistent trends at the municipality level. The far-right votes lost to immigration are captured by the two pro-immigration parties. Turning to potential mechanisms, immigration is found to increase voter turnout, potentially activating local pro-immigration voters. Moreover, the negative effect is only present in municipalities with high initial exposure to immigrants, consistent with the intergroup contact theory. Finally, I also provide some evidence for welfarestate channel as a plausible mechanism behind the main result. JEL Codes: H71, J15, J61, P16


Introduction
The popularity of far-right (sometimes also referred to as populist radical right) 1 parties across Europe has been rising rapidly in recent years. Latest political developments in Europe -such as the UK's exit from the European Union -suggest that the surge of the far-right could have significant negative economic and political consequences for the entire continent. The rise of the far-right appears to be driven (in large part) by immigration. Since the early 1990s, Europe has experienced significant migration flows. First, the East to West migration from post-communist countries which began with the fall of the Soviet Union, and accelerated after the EU enlargements in 2000s. And in recent years, a large inflow of asylum seekers from Asia and Africa fueled by a number of armed conflicts. Both of these immigration shocks likely kindled anti-immigrant sentiments across the continent, contributing to an unprecedented wave of electoral success among far-right parties.
This paper studies the effect of immigration on voting for the far-right on a local (municipality) level. This micro effect is facilitated through the personal contact between natives and immigrants as well as the perceived impact of foreign in-migration on local communities. By contract, the macro effect of national immigrant inflows refers to the salience of migration in the national social and political discourse. 2 The micro-level impact of immigrants on natives' voting choices is a priori ambiguous 3 and thus requires empirical examination. This study focuses on Finland, a country which had a single far-right party (the Finns Party) for nearly 25 years , but was long considered immune to the surge of the far-right seen in other European countries (Figure 1;Ellinas 2010;Goodwin 2008;Ignazi 2003). The period of study is 2006-2015. These years are characterized by both the historically largest inflow of foreign citizens into Finland (Figure 2;Koivukangas 2003), and a remarkable rise in Finns Party's popularity (Figure 1). Indeed, taken together, Figures 1 and 2 suggest a positive correlation between immigration and far-right voting on the national level. The 1 The term far-right (or far right) is used in Betz (2008), Davies (2008), Ellinas (2010), Goodwin (2008), and Roxburgh (2002). The label populist radical right is preferred by Arter (2010) and Mudde (2007). Still, others use the terms right-wing populist (Norocel, 2016;Swank and Betz, 2002) or even extreme right (Carter, 2005;Ignazi, 2003). These different labels generally refer to the same party family.
2 As proposed by Hopkins (2010) in his politicized places hypothesis, the two channels likely interact with each other. For example, in communities that experience a rapid demographic change during the period of salient national immigration rhetoric, immigrants can quickly become targets of local political hostility.
3 Group conflict theory (Sherif et al., 1961) and ethnic competition theory (Olzak, 1992) suggest a positive effect, while the intergroup contact theory (Allport, 1954) predicts the opposite. Economic theories of labor market competition and welfare-state are less clear-cut; the predictions depend on the precise characteristics of immigrants and natives (Scheve and Slaughter, 2001;Facchini and Mayda, 2012;Dustmann and Preston, 2007). analysis employs a novel panel dataset which spans 7 election years and 297 municipalities (all of mainland Finland). All types of national elections (i.e. parliamentary, presidential, and European parliamentary) are considered.
The sudden and unprecedented increase in immigration into Finland that followed the 2004 EU enlargement also provides an excellent setup for identification. The 2003 distributions of immigrants by continent of citizenship can be used to construct a "shift-share" instrument (Altonji and Card, 1991;Orrenius and Zavodny, 2015) to identify the effect of immigration on far-right voting. One thing that makes this instrument particularly convincing in this case is the change in immigrant composition that followed the 2004 enlargement. While the 1990s and early 2000s were characterized primarily by an influx of Ingrian Finns from the former Soviet Union and asylum seekers from countries such as Somalia and former Yugoslavia (Koivukangas, 2003), the 2004 and the subsequent EU enlargements brought in mostly economic migrants from Central and Eastern Europe. This minimizes the concern that IV results could be driven by a persistence of trends in anti-immigrant or pro-immigrant attitudes across municipalities.
Using the shift-share instrument, I find an economically meaningful and statistically significant negative effect of municipal in-migration of foreigners on Finns Party's vote share. The IV coefficient from the preferred specification suggests that one percentage point increase in the share of foreign citizens in municipality (68% of the mean) decreases Finns Party's vote share by about 3.35 percentage points (28% of the mean). Placebo tests using pre-period data confirm the IV estimate is not driven by persistent trends at the municipality level. To further validate the IV design, I re-estimate the main specification using a shift-share instrument constructed with 1991 immigrant distributions. 4 The resulting coefficient remains negative, statistically significant at 5%, and slightly larger in magnitude than the original estimate. Additional robustness checks such as a first-difference estimation, the inclusion of lagged-immigrant share, the exclusion of potential outliers, and the estimation with larger geographical units confirm the main result.
Considering the effect of immigration on voting for other parties, I find that the strongly proimmigration Green League and Swedish People's Party gain votes. Indeed, their positive coefficients roughly add up to the negative estimate for the Finns Party. These positive effects are also relatively large; one percentage point increase in the foreign share increases Green League's vote share by 23% and Swedish People's Party's vote share by 57% with respect to the sample mean.
Exploring the potential mechanisms behind my main finding, I first show that local foreign in-migration increases voter turnout (3% with respect to mean), potentially activating a larger proimmigration base. Interestingly, the share of protest votes remains unaffected by immigrant inflows.
In addition, heterogeneity analysis reveals that the negative effect of immigration on Finns Party's vote share is only present in places with large initial exposure to immigrants. This finding provides some evidence in favor of Allport (1954)'s intergroup contact theory which suggests that a meaningful contact between natives and immigrants can effectively ameliorate natives' anti-immigrant attitudes. Finally, I also find some evidence consistent with the welfare-state channel. In particular, I show that immigration increases municipal per capita personal income tax revenue, while the per capita spending on social services, health care services, and education remain unaffected. Mayda, 2012, 2009;Dustmann and Preston, 2007).
My analysis contributes to the growing economics literature on the effects of immigration on voting for the far-right and other anti-immigrant parties in Europe (described in more detail in Section 2). 5 Most studies find a positive effect (Halla et al., 2017;Barone et al., 2016;Becker and Fetzer, 2016;Edo et al., 2019;Gerdes and Wadensjö, 2008;Harmon, 2018;Mendez and Cutillas, 2014;Otto and Steinhardt, 2014;Brunner and Kuhn, 2018), while the negative relationship has only been documented in Steinmayr (2018), and to some extent also in Dustmann, Vasiljeva, and Damm (2019) and Levi, Dasi Mariani, and Patriarca (2020).
This study is the first to show that an inflow of economic migrants can reduce support for the far-right across all types of national elections. By contrast, both Steinmayr (2018) andDustmann et al. (2019) consider the exposure to refugees through refugee allocation schemes. In addition, Steinmayr (2018) evaluates the impact of a specific and relatively short-term event -the European refugee crisis -and considers only the extensive margin of immigration. This paper, on the other hand, focuses on the intensive margin and the study period spans 10 years and involves three types of national elections. Regarding Dustmann, Vasiljeva, and Damm (2019), the negative effect is present only in a limited subsample analysis of the 5% most urban Danish municipalities (i.e. 26 5 A number of correlational studies in political science have also considered the relationship between immigration and voting for European far-right parties. Results are mixed: positive association is found in Golder (2003), Swank and Betz (2002), and Anderson (1996); while Dülmer and Klein (2005), Messina (2007), and Kitschelt and McGann (1995) estimate a negative relationship. observations). By contrast, I find no effect heterogeneity with respect to initial population sizethe negative effect is present in municipalities both above and below the median initial population size.
Second, this paper examines a broad set of electoral outcomes in a parliamentary democratic system, which before the emergence of the Finns Party was characterized by basic electoral stability and the implosion of the party system. The former refers to a low volatility of electoral gains and losses while the latter describes a scenario in which all major parties become center parties capable of forming a coalition government with one another (Arter, 2008). In this political setting, uniquely positioned to face the threat of a right-wing populist party, I consider the impact of immigration on voting for other parties, voter turnout, as well as the protest vote. A few previous studies have considered the impact of immigration on voter turnout. Barone et al. (2016) find a negative effect while Steinmayr (2018) finds no effect. Dustmann et al. (2019) find a positive effect but only in municipal elections, whereas I find an increase in turnout in context of the national elections. As far as the protest vote is concerned, the only other paper that considers it is Barone et al. (2016).
While they find an increase in the share of invalid ballots in response to immigrant inflow, I find no effect on the protest vote.
Third, Finland provides a unique setting in a number of other dimensions as well. Before the 2004 EU enlargement, Finland was a country with minimal immigrant inflow and a very low farright popularity. Even after 2004, both the stock and the inflow of migrants remained relatively low compared to other EU countries (Eurostat, 2020). In addition, the majority of immigrants have been from Europe ( Fig. 4), with a large number of economic migrants arriving from the Central and Eastern Europe following the 2006 and 2007 labor market openings (Fig. 5). Last but not least, Finland is also interesting as it is characterized by an extensive welfare state, highly educated and aging population, compressed wage distribution, and high union density (Sarvimäki, 2011;Koivukangas, 2003), all of which have likely played an important role in shaping natives' attitudes towards immigration.
Fourth, this paper is one of only a handful of studies providing evidence for the welfare-state channel as a possible mechanism through which immigration affects far-right voting. This is particularly appealing given that Finland is a country with generous welfare system (managed primarily by municipalities), and thus native concerns about immigrant "benefit tourism" are especially rel-evant in this context. Previous papers have focused mostly on labor market and compositional amenities (Halla et al., 2017;Barone et al., 2016;Becker and Fetzer, 2016), cultural diversity (Barone et al., 2016), the intergroup contact theory (Steinmayr, 2018), and other non-economic aspects (Otto and Steinhardt, 2014). Otto and Steinhardt (2014) do consider welfare channel as well, but they provide only indirect evidence.
The paper is organized as follows: Section 2 surveys the findings in the previous literature.
Section 3 discusses the background. In Section 4, I describe the data and identification strategy. Results are presented in Section 5. Section 6 discusses the potential mechanisms. Section 7 concludes.

Related literature
Far-right parties across Europe have a strong anti-immigration rhetoric at the core of their political platforms. This feature stems from their ideology of ethno-nationalism (or nativism), defined by Betz (2008) to be a "strong belief that different societies and cultures adopt entirely different values, which are neither inferior, nor superior, but essentially incompatible with each other." This ideology makes far-right parties both nationalistic and xenophobic, and in recent years also Islamophobic (Mudde, 2007). In a recent report, Esipova et al. (2015) suggest that Europeans are the most negative in the world towards immigration, with 52% preferring a lower immigration levels in their countries. Thus, to better understand the recent rise in the far-right in Europe, it is instrumental to study the role immigration plays in this process.
A growing number of recent papers in economics have explored this issue empirically, each focusing on a case of a specific European country. Halla, Wagner, and Zweimüller (2017) use a shift-share instrument to study the effect of immigrant inflow on voting for the Freedom Party of Austria (FPÖ). They find a positive effect which is driven by voters' fear of the adverse impact of immigration on local labor markets and compositional amenities. In an Italian setting, Barone et al. (2016) show that foreign municipal in-migration increases vote share of the anti-immigrant center-right coalition (which includes the far-right Northern League). Proposed mechanisms in this study include cultural diversity, competition in the labor market and for public services, and political competition. Studies have also found a positive effect in Germany (Otto and Steinhardt, 2014), United Kingdom (Becker and Fetzer, 2016), France (Edo et al., 2019), Denmark (Gerdes and Wadensjö, 2008;Harmon, 2018), Spain (Mendez andCutillas, 2014), andSwitzerland (Brunner andKuhn, 2018).
In contrast with the previous studies, Dustmann, Vasiljeva, and Damm (2019) use a quasirandom allocation of refugees into municipalities to study the impact of immigration on voting in Denmark. Documenting a large effect heterogeneity, the authors find that in all but the most urban municipalities, refugee inflow increases vote share of both anti-immigrant and center-right parties, while the vote share of center-left parties declines. However, in the most urban municipalities, refugee allocation actually decreases support for anti-immigrant parties. The negative effect has also been documented in Steinmayr (2018) who suggests that hosting refugees in Austrian municipalities dampened the overall positive trend in support for the Freedom Party (FPÖ), consistent with Allport (1954)'s intergroup contact theory. Interestingly, he also finds that a brief exposure to a large number of refugees passing through the municipalities actually increased FPÖ's vote share.
Similarly, Levi, Dasi Mariani, and Patriarca (2020), considering the dynamics of migration and the voting for Britain's far-right UKIP, show that immigrants increase far-right support only in the short-run, while in the long-run it is the opposite.
The relationship between immigration and far-right popularity is undeniably tied to the underlying attitudes of natives towards immigrants and immigration policy. Two economic channels have been identified as potential determinants of these sentiments. In line with the labor market hypothesis, Mayda (2006) finds that skilled individuals are more (less) likely to be pro-immigration in countries where the relative skill composition (i.e. ratio of skilled to unskilled labor) of natives to immigrants is high (low). Scheve and Slaughter (2001) draw a similar conclusion suggesting that less-skilled workers are significantly more likely to prefer limitation of immigrant inflows into the country.
The second economic mechanism is the so called welfare-state channel. Consistent with its predictions, Mayda (2012, 2009) find that in countries where immigrants are unskilled, pro-immigration preferences are negatively correlated with income and positively correlated with skill. These relationships are reversed in economies characterized by skilled migration. In a similar analysis, Dustmann and Preston (2007) find welfare concerns to be a more important determinant of natives' attitudes towards immigrants than labor market concerns.
A number of studies have also emphasized the importance of non-economic mechanisms such as crime, xenophobia, and the cultural or national identities (Nunziata, 2015;O'Rourke and Sinnott, 2006;Mayda, 2006), as well as the significance of social cohesion in general (Zimmermann, 2019). In a cross-country analysis of OECD countries, Bauer, Lofstrom, and Zimmermann (2000) show that natives in countries receiving mostly refugees care primarily about social issues such as crime, while those in countries with a lot of economic migrants are more concerned about their labor market outcomes. Finally, immigrants can also affect natives' non-pecuniary working conditions (Giuntella et al., 2019) and general life-satisfaction (Akay, Constant, and Giulietti, 2014;Akay, Constant, Giulietti, and Guzi, 2017). Both of these factors likely play an important role in determining natives' sentiments as well.

The Finns Party
The Finns Party (previously known as the True Finns; Finnish: Perussuomalaiset, PS) was the single far-right party in Finland since its establishment in 1995 until it split into two in mid-2017. In 1997, its first chairman, Raimo Vistbacka, was replaced by Timo Soini who led the party until 2017.  (2006)(2007)(2008)(2009)(2010)(2011)(2012)(2013)(2014)(2015) ends two years before the split occurred. The following description applies to the period of Finns Party's uniform existence.
According to Norocel (2016), some Finnish scholars argue that the party is not necessary a clearcut case of far-right due to its strong left-leaning political agenda on economic matters. However, as Westinen (2014) points out, there is little doubt that the Finns Party is a nationalist-populist 6 The Finns Party (official website): https://www.perussuomalaiset.fi/ movement which combines ethno-nationalism and anti-elitism, typical features of far-right parties in Europe (Mudde, 2007). 7 This view is shared by Arter (2010) who claims that the notion of true Finnishness (suomalaisuus) is the pre-eminent concept of Finns Party's ideology. Finally, Yla-Anttila and Yla-Anttila (2015) underline the points mentioned above suggesting that the Finns Party's ideology combines a populist defense of a common man against corrupt elites, a defense of welfare state against market-led policies, and a nationalist defense of the sovereignty and unity of the Finnish people against immigration and federalist tendencies of the European Union. These points clearly suggest that the Finns Party can be considered a member of the European far-right family.
The party has a strong anti-immigration platform, as described in the following statement from its 2015 parliamentary election campaign pamphlet: Immigration will change, irreversibly, the host country's population profile, disrupt social cohesion, overburden public services and economic resources, lead to the formation of ghettoes, promote religious radicalism and its consequences, and foster ethnic con-  Table 1 suggests, throughout the study period, the party was consistently in favor of a tough immigration policy while strongly opposing multiculturalism (advocating for immigrant assimilation instead). In addition, immigration policy was a very salient topic in Finns Party's manifestos (  Mudde (2007), European far-right parties share three common ideological features: ethnonationalism, populism, and authoritarianism. Populism considers society to be ultimately separated into two groups, "the pure people" and "the corrupt elite", and argues that politics above all should be expression of the will of the people. Authoritarianism is defined as a disposition to glorify, to be subservient to and remain uncritical toward authoritative figures of the ingroup (hence the reason why far-right parties are typically led by authoritative leaders such as Le Pen, Wilders, Soini, etc.).

Presidential elections
The President of the Republic of Finland is elected in a direct vote for a 6-year term. Each presidential candidate must be a native-born Finnish citizen, and no individual can stay in the office for more than 2 consecutive terms. Candidates are nominated by parties that have currently at least 1 seat in the parliament, or by constituency associations established by at least 20,000 people entitled to vote. The election proceeds in one or two rounds, the second round being essentially a runoff between the two most successful candidates from the first round. The second round takes place only if no candidate gains more than 50% of all votes in round 1. Each presidential election is held on the fourth Sunday of January (round 1), with the second round taking place two weeks later. Voting eligibility is the same as in parliamentary elections; advance voting is also allowed (Ministry of Justice 2010).

European elections
As a member of the European Union, Finland can elect Members of the European Parliament

Immigration into Finland
Historically, Finland has been characterized by emigration (Sarvimäki, 2011). From the end of the World War II until the early 1970s, the country attracted very few migrants. Although immigration increased in the 1970s, throughout the 1970s and 1980s some 85 percent of immigrants were return migrants coming mostly from Sweden. A small number of refugees from Vietnam and Chile also arrived during this period (Triandafyllidou and Gropas, 2008). It was not until the 1990s that Finland experienced a major inflow of foreign citizens (Koivukangas, 2003). As Figure 2 suggests, the first significant wave of foreigners began arriving in 1991 and was caused by the dissolution of the Soviet Union and the civil wars in the (former) Yugoslavia and Somalia. Ingrian Finns from Russia and Estonia and asylum seekers from Yugoslavia and Somalia made up the largest foreign immigrant groups in Finland throughout the 1990s (Koivukangas, 2003). Due (in part) to a restrictive refugee policy, 11 the fraction of population with foreign citizenship remained below 2% until 2003, one of the lowest in the EU during this period (Figure 3 In the last couple of years, Finland has also witnessed a sizable inflow of asylum seekers from Northern Africa and Middle East. However, since the last national election in Finland took place in mid-2015, my study period ends at the onset of the recent European refugee crisis, before any significant number of asylum seekers arrived in Finland. Soini, who was eliminated in the first round in both cases. Municipal elections are not used in the analysis since any foreigner with a permanent residency in a given municipality is eligible to vote in that municipality's local election. 13 A similar concern arises with European elections since non-Finnish EU citizens with a municipality of residence in Finland are eligible to vote for Finnish MEPs (Ministry of Justice 2010). Figure 6 plots the distribution of the share of votes cast by non-Finnish EU citizens across all municipalities in the 2014 European election. The histogram shows that almost 35% of municipalities had no foreigners casting a vote. 14 Moreover, almost all municipalities are located below the 0.5% mark meaning the proportion of foreign votes cast in most cases was negligible. Histogram generated for the 2009 European election (available upon request) shows distribution that is even more skewed to the right. Nevertheless, as an additional robustness check I exclude the 2009 and 2014 European elections from the analysis.
Spatially, the analysis extends to all of mainland Finland; excluded are only theÅland Islands (16 municipalities).Åland is a Swedish-speaking autonomous region that belongs to Finland and is located between continental Finland and Sweden. Its population makes up roughly 0.5% of the country's total population (sources: Statistics Finland, Statistics and ResearchÅland). Although the region has its own parliament, the people ofÅland also elect one member of the Finnish Par-13 Data on the number of foreign votes cast in local elections (overall and for individual parties) is not available. 14 102 out of 297 municipalities (34.3%) had exactly 0 foreign votes in 2014 European election. liament in every national parliamentary election. However, the Islands have their own political parties and so voting for the Finns Party is not an option. Moreover, since the region is not only linguistically but also culturally Swedish, it would not be appropriate to include these municipalities in the same analysis with the rest of the country. 15 In past 12 years, the number of municipalities in Finland has been steadily shrinking to 313 (as of January 1, 2016). Municipality changes were mostly merges of two (or more) municipalities together. Information on all changes was provided by The Association of Finnish Local and Regional Authorities as well as Statistics Finland. The panel dataset is constructed using the 2016 municipality format. The dependent variable in the analysis is the Finns Party's share of valid votes.
The independent variable of interest is the share of foreign citizens in a municipality. The analysis also includes the following municipality-specific time-varying controls that likely affect voting for the Finns Party: log of total population, population density (per km 2 ), share of females in adult population, share of population (25-64) with tertiary education, share of aged 65+ in adult population, ratio of skilled to unskilled labor (in population aged 20-64), total crime rate (per 100,000 population), unemployment rate and media household disposable income (per consumption unit).
More details about the covariates are reported in the Appendix A. All data comes from Statistics Finland's public-use StatFin database. Table 2 provides the descriptive statistics for all variables.
A potential pitfall with using election vote share is naturalization, a process through which most foreigners without family ties to Finnish citizens obtain Finnish citizenship. Since naturalized Finns are de facto foreigners, a significant number of votes from these individuals will contaminate the dependent variable. However, as Gozdecka (2013) points out, Finnish citizenship has been a rather exclusive good aimed at foreign nationals who have put substantial effort into finding employment in Finland, learning Finnish language, and integrating themselves into Finnish society. This is indeed reflected in Finland's naturalization rate, 16 which has had a fairly stable trend in the past 25 years (Fig. 7). During the 2006-15 period, the naturalization rate had a declining trend (albeit with a considerable year-to-year variation). On average, the yearly rate was 3.6% during this time. Thus, although the problem with naturalization cannot be completely ruled out, the evidence presented here suggests that the number of naturalized Finns is not high enough to alter the results. 15 The Office ofÅland website: http://www.aland.ax/en/facts-about-aland/. 16 Defined as the # of citizenships granted divided by the total foreign-born population.

Baseline fixed effects specification
The baseline empirical specification is the fixed effects model of the form: where Far-right i,t is the Finns Party's share of valid votes in municipality i and election year t. All  (2018)). However, as a robustness check, I estimate an alternative first-difference model, following the strategy proposed by Sá (2014).
The OLS estimation of equation (1) will likely suffer from endogeneity issues arising from sorting among both natives and immigrants. First, immigrants may decide to avoid anti-immigrant far-right strongholds. This has been shown in a recent paper by Slotwinski and Stutzer (2019) Table 3. Reassuringly, the municipalities with significant initial far-right support do not appear be receiving less migrants after the 2004 EU enlargement. However, even if immigrants do not sort based on the pre-existing anti-immigrant sentiments, they might decide to leave municipalities which turn hostile towards them. This reverse causality would bias OLS downwards.
The second potential source of endogeneity is immigrant-induced native sorting. More specifically, an inflow of immigrants into a municipality may trigger an outflow of natives who face direct labor market competition (Borjas, 2006). Also, as immigrants move in, natives who are antiimmigrant for non-economic reasons may decide to leave. A disproportionate number of natives who leave might therefore consist of far-right voters, in which case the OLS estimate will be biased downwards. On the other hand, pro-immigrant natives who derive positive utility from living in a diverse community could decide to move in together with the immigrants. Such inflow of natives who arguably do not support the Finns Party would bias the OLS estimate downwards as well.
Finally, as Borjas, Freeman, and Katz (1996) suggest, immigrants may also cluster in areas with better socioeconomic conditions which are less supportive of the far-right, resulting in a downward bias as well. On the other hand, as Halla, Wagner, and Zweimüller (2017) point out, if a community is hit by a negative economic shock which depresses housing prices, it may actually attract immigrants. If this shock also shifts voters' preferences to the far right, the resulting bias will be positive.

Identification
To identify the causal effect of interest, I employ instrumental variable approach using a "shiftshare" IV (Altonji and Card, 1991). This instrument is based on an observation that immigrants where Foreign i,t is the predicted share of foreign citizens in municipality i in election year t, Foreign j t is the number of foreign citizens from continent j in mainland Finland in election year t, and Share in i j 2003 is the share of foreigners with continent of citizenship j in municipality i in 2003.
As the summation indicates, immigrants are divided into 6 groups based on their citizenship ( The IV estimates could still be invalid if there is a persistence of municipality-specific trends in pro-immigrant and/or anti-immigrant attitudes. The inclusion of the region-by-election year fixed effects mitigates this concern. In addition, I conduct a placebo test with pre-period election data (1996)(1997)(1998)(1999)(2000)(2001)(2002)(2003) to directly test for such persistence. Finally, if natives "vote with their feet" and if this native sorting after 2006 is correlated with the baseline immigrant distributions, IV estimate will be biased. I therefore re-estimate equation (1) using the same IV approach, but larger geographical units (administrative subregions and regions). A significant change in the IV coefficient will indicate a presence of such bias. In addition, I conduct a direct test of native sorting using an approach proposed in Peri and Sparber (2011).

Main results
Before showing the regression estimates, it is useful to first consider visual evidence. In Figure 8,  To explore the likely source of this attenuation bias, I consider more closely the procedure implemented by Statistics Finland to account for the foreign citizens living in a municipality in a given year. First, foreign citizens are counted in only if they intend to live in Finland for at least 12 months upon arrival into the country. Thus, some students, workers, and other visitors are excluded, even though their presence might affect natives' voting preferences. Another important group that is not included in the measure of the foreign population are asylum seekers whose applications are pending. On the other hand, foreign citizens with permanent residency in Finland are counted in the data even if they are temporarily living abroad, in which case my main independent variable will overcount the "true" immigrant population (Statistics Finland, 2016).

Alternative first-difference specification
As the main robustness check, I estimate an alternative, first-difference version of equation (1) which uses net immigrant flow as the main independent variable. The specification is based on the main estimating equation in Sá (2014) and has the following form: where ∆Far-right i,t is the level change in Finns Party's vote share in municipality i between elections at t − 1 and t. 19 ∆Foreign-born i,t is the change in the number of foreign citizens in municipality i between t − 1 and t. To be consistent with equation (1)  A natural concern with a shift-share instrument is that persistent trends at the municipality level may be correlated both with the IV and the outcome of interest. To partially address this endogeneity concern I conduct a placebo test using pre-period election data. In particular, I estimate the following cross-sectional specification using OLS:  Table 6, columns (1) and (3). Reassuringly, a lack of any statistically significant correlation supports the validity of the IV's exclusion restriction.
In columns (2) and (4) The shift-share instrument itself has also been challenged in a recent paper by Jaeger, Ruist, and Stuhler (2018), who argue that the estimate of the short-run effect of immigration could be "contaminated" by the long-run general equilibrium effect of previous immigrant wave(s). Thus, I follow their suggestion and include a 2-year lag of the share of foreign citizens in the main specification. Both the immigrant share and its lagged counterpart are instrumented for using the shift-share IV based on 2003 baseline distributions. Results are presented in Table A.7. The main IV coefficient increases in magnitude while also remaining statistically significant at 0.1% level.
Although the Kleibergen-Paap rk Wald F-stat. in the full specification (

Direct test of native sorting
As noted earlier, another threat to identification comes from immigrant-induced native mobility.
Different specifications have been suggested to test for it. 20 Peri and Sparber (2011) evaluate each of these specifications using simulated data and find that some of them have built-in biases. They suggest estimating the following model which is based on Card (2009): where N i,t is the number of Finnish citizens in municipality i and election year t, and N i,t−1 is the number of Finnish citizens in i in t − 1 (i.e. one calendar year before t). Similarly, F i,t and F i,t−1 refer to the number of foreign citizens in i at t and t − 1, respectively. Pop i,t−1 is the total population in municipality i in t − 1. The specification also controls for municipality fixed effects (φ i ) and election year fixed effects (λ t ). The coefficient of interest is β and its interpretation is as follows: β > 0 means there is an attraction between natives and immigrants, while β < 0 suggests a native outflow in response to the inflow of immigrants. Sá (2014) further points out that OLS estimation of eq. (6) will likely lead to an upward bias in the estimate of β, since unobserved factors that attract immigrants into municipality could also attract natives. Therefore, I estimate (6) using the same shift-share instrument as before (with minor adjustments). 21 Eq. (6) is estimated using both municipality-level and subregional-level data, where 67 subregions approximate local labor markets. Results (OLS and IV) are presented in Table 7. All four coefficients are insignificant suggesting that immigration did not induce native mobility.
Another way to confirm that native sorting does not bias the main IV estimates is to re-estimate eq. (1) using larger geographical units (subregions and regions). Mainland Finland consists of 18 administrative regions. The required underlying assumption states that if natives are mobile, they will sort within regions but not across regions (due to family ties and other costs of moving). Estimation results are shown in Table A.8. All three estimates are negative and statistically significant.
The regional-level coefficient is smaller in magnitude than its municipality-level counterpart, but the coefficients are not statistically different from one another. The subregional-level coefficient, if anything, is larger in magnitude than the municipality-level estimate. This mitigates the concern that native sorting and spillover effects confound my analysis.

Immigration and voting for other parties
An important aspect of any election study is understanding which parties benefit from one party's loss of votes. In context of my analysis, this means finding out which parties gained the votes Finns Party lost due to immigration. Thus, I re-estimated eq. (1) using vote share of every main party as the dependent variable. 22 Table 8 presents the results. As expected, the two parties that gained votes were the pro-immigration Green League and Swedish People's Party. Their positive coefficients indeed add up to the size of the Finns Party's negative coefficient. Moreover, the relative gains of these two parties were large, especially for the Swedish People's Party (57% with respect to the sample mean).
6 Discussion of potential mechanisms 6.1 Immigration, voter turnout, and protest vote In order to shed some light on the potential mechanisms through which immigration reduces Finns Party's support, I first consider the impact of immigration on voter turnout (share of eligible voters who cast ballot in election) and protest vote (fraction of total ballots that are invalid). As Table 9 shows, foreign municipal in-migration increased voter turnout although the effect was small (3%).
Protest vote was not affected. This suggests immigration induced natives' participation in the election process, potentially activating anti-far-right voters who would otherwise not vote. It is also worth noting that the OLS counterparts to all coefficients in Tables 8 and 9 are smaller in magnitude (see Tables A.9 and A.10), further suggesting the presence of attenuation bias due to measurement error in the share of foreign citizens.

Heterogeneity analysis & intergroup contact theory
Next, I test for the heterogeneity in the effect with respect to various initial conditions. In particular, first, the sample is split based on the values of initial conditions (i.e. population, population density, immigrant share, Finns Party's vote share, share of tertiary educated, skill ratio, median household income, unemployment rate) 23 into those above and those below the median. Then, separately for each initial condition, the share of foreign citizens is interacted with the above-median/belowmedian dummies. All regressions are estimated using the same IV as before. Results are reported in Table 10. The strong negative effect is present across municipalities regardless of their initial size, density, level of education, skill ratio, median income, and unemployment rate. The coefficient is remarkably stable across different specifications both in terms of its magnitude and statistical significance. However, columns (3) and (4) do show some heterogeneity in the effect, since in both cases, the hypothesis that the two coefficients are equal can be rejected. Column (4) suggests that municipalities with higher pre-existing support for the far-right experienced a smaller reduction in anti-immigrant attitudes than the municipalities where Finns Party was less popular to begin with.
However, the effect of immigration on high-nationalist municipalities is still negative and sizable, suggesting that inflow of immigrants even into the far-right "strongholds" can ameliorate natives' attitudes towards foreigners.
The most interesting result of Table 10 is presented in column (3). The negative effect of immigration on Finns Party's vote share is found only in municipalities with high pre-existing immigrant share. In other words, places where natives are already living side-by-side with immigrants are the ones that experience a reduction in anti-immigrant attitudes as a result of further immigrant inflow.
This suggests that previous exposure to immigrants matters, providing some evidence in support of Allport (1954)'s intergroup contact theory. The importance of sustained contact between natives and immigrants is further strengthened by the results from an additional heteronegeity analysis, in which I split the sample by the 25th and 75th percentiles (Table A.11). The negative effect is only present in the municipalities in the top quartile of the initial immigrant share (Table A.11, col. 3).
Interestingly, Table A.11 also reveals that the effect is stronger in the most rural places compared to the most urban communities (col. 2). However, given the weak first stage in this analysis, this result has to be treated with caution.

Welfare-state channel
Last but not least, the welfare-state channel is yet another potential mechanism that could explain my main finding. There are two possible policy scenarios through which immigration affects welfare system of the host country. On one hand, migration can lead to changes in tax rates while per capita benefits are kept constant (tax adjustment model ). On the other hand, tax rates might remain unchanged while per capita benefits adjust (benefit adjustment model ). Under both scenarios, if immigrants are, on average, net contributors to the system (i.e. their tax contributions exceed the amount of social assistance they receive), both high-skilled and low-skilled natives will likely benefit from the presence of foreign workers due to a positive welfare spillover Mayda, 2012, 2009). Therefore, an influx of such immigrants can ameliorate natives' attitudes towards them, and thus make natives less supportive of the anti-immigrant Finns Party.
In the absence of any individual-level data on immigrant tax contributions and social assistance program take-up, I turn to municipality-level data instead. Using data from 2006-2010 (including non-election years), I consider the effect of immigration on municipal tax revenue and spending. 24 The analysis uses the same IV as the main estimation. I find a small positive effect of municipal in-migration of foreign citizens on per capita personal income tax revenue (2.5%), although the coefficient is statistically significant only at 10% (Table 11, column 2). On the other hand, there is clearly no effect of immigration on per capita property tax revenue or corporate tax revenue (Table   11, columns 3 and 4).
The provision of social welfare in Finland is delegated to individual municipalities (source: Ministry of Social Affairs and Health). As Hytti and Paananen (2003) explain, immigrants with a resident permit valid for at least a year have the same rights to social security (i.e. unemployment benefits, family benefits linked to childbirth and child-rearing, and income support) as the native population. As Table 11, column (5) suggests, immigration had virtually no effect on municipal per capita spending on social and health care services. In addition, there is no effect of immigration on per capita spending on education and cultural activities. These findings suggest that an inflow of foreigners into a municipality did not overburden the provision of social welfare and other public services. Together with the positive effect on municipal income tax revenue, this suggests that welfare-state channel appears to a plausible mechanisms explaining the main finding.

Conclusion
This paper uses a novel panel dataset to study the effect of immigration on voting for the farright Finns Party in Finland. Using instrumental variable approach based on previous settlement patterns of immigrants, I show that municipal in-migration of foreign citizens has a statistically significant and sizable negative effect on Finns Party's electoral support in national elections. In particular, one percentage point increase in the share of foreign citizens in municipality decreases Finns Party's vote share by 3.5 percentage points (28% of the mean). This result -albeit consistent in magnitude with the negative estimates in Steinmayr (2018) and Dustmann, Vasiljeva, and Damm (2019) -runs contrary to most findings in the previous literature. Placebo tests using pre-period data suggest that the negative effect is not driven by persistent trends at the municipality level.
The votes Finns Party loses due to immigration are captured by the two pro-immigration parties -the Green League and the Swedish People's Party.
To explore the potential mechanisms driving my main finding, I first show that immigration increases local voter turnout, potentially activating a larger portion of the pro-immigration base in the municipality. In addition, heterogeneity analysis reveals that the negative effect of immigration on far-right popularity is present only in the communities with large initial immigrant share. This provides some evidence in support of Allport (1954)'s intergroup contact theory, which emphasizes the importance of sustained contact between natives and immigrants in ameliorating the local antiimmigrant sentiments. Finally, I provide some evidence consistent with the welfare-state channel as a potential mechanism. In particular, I find that foreign in-migration increases per capita municipal income tax revenue, while the per capita spending on social services, health care, and education remain unaffected.
Given the serious nature of the threat far-right parties pose to the European integration process, Europe's security (given the ongoing threat from the Russian Federation), and potentially even the future of liberal democracy, the role of far-right parties in Western societies remains one of the most important topics of the public debate in Europe today. This paper contributes to the debate by presenting a unique case study showing that under some conditions, local immigrant inflow can actually reduce far-right popularity. To better understand the complexity of the relationship between immigration and far-right voting, future research needs to carefully address the interplay between micro-level and macro-level exposure to immigrants and how it affects the far-right popularity.
Compliance with ethical standards:

Funding:
The author received no funding for this study.

Conflict of interest:
The author declares that he has no conflict of interest.   Immigration into Finland (1990Finland ( -2015 Notes -Data comes from Statistics Finland's StatFin database.      1st -25th perc.
Notes -Data comes from Statistics Finland's StatFin database. 2016 municipality-level ArcGIS shapefile was provided by The Association of Finnish Local and Regional Authorities. Both maps depict all of mainland Finland (297 municipalities in total) and employ a Transverse Mercator projection. The 16 Swedish-speaking municipalities ofÅland Islands are excluded. Notes -Immig. policy position -position on immigration policy (0 -10; 0 -"strongly opposes tough policy"; 10 -"strongly favors tough policy"). Immig. policy salience -importance/salience of immigration policy (0 -10; 0 -"not important at all"; 10 -"extremely important"). Multiculturalism -position on integration of immigrants and asylum seekers (0 -10; 0 -"strongly favors multiculturalism"; 10 -"strongly favors assimilation"). Vihr -Green League; SFP/RKP -Swedish People's Party; Kok -National Coalition Party; Kesk -Centre Party; SDP -Social Democratic Party; KD -Christian Democrats. Data comes from the 1999-2014 Chapel Hill Expert Survey (CHES) trend file.   (2004): share of citizens from EU27, share of citizens from the rest of Europe, share of citizens from Africa, share of citizens from Asia, share of citizens from America, share of citizens from Oceania, log of population, population density, share of females, share of aged 64+, share of tertiary educated, ratio of skilled to unskilled labor, median household income, unemployment rate, total crime rate (measured in 2003). Robust standard errors in parentheses. Data comes from Statistics Finland's StatFin database. *** Significant at the 0.1% level. ** Significant at the 1% level. * Significant at the 5% level. † Significant at the 10% level.  Notes -∆ Finns Party -level change in Finns Party's share of valid votes between elections at t − 1 at t. Net Immigrant Flowchange in number of foreign citizens between election year t − 1 and t. Standard errors in parentheses, clustered at municipality level. All regressions also control for municipality-specific time trends (municipality dummies), national trends (election year dummies). Data comes from Statistics Finland's StatFin database. *** Significant at the 0.1% level. ** Significant at the 1% level. * Significant at the 5% level. † Significant at the 10% level.  (1999-2003) (1995-1999) (1999-2003) (1995-1999)   Estimation also includes the following 2003 controls: log of population, population density, share of females, share of tertiary educated, share of aged 65+, ratio of skilled to unskilled labor, total crime rate, unemployment rate, median household income. Robust standard errors in parentheses. Data comes from Statistics Finland's StatFin database. *** Significant at the 0.1% level. ** Significant at the 1% level. * Significant at the 5% level. † Significant at the 10% level. Notes -Native Net Flow -yearly net flow of Finnish citizens (% of population at t − 1). Immigrant Net Flow -yearly net flow of foreign citizens (% of population at t − 1). Standard errors in parentheses, clustered at respective levels (municipality, subregion). First two columns control for municipality fixed effects and election year fixed effects, while the last two columns control for subregion fixed effects and election year fixed effects. Data comes from Statistics Finland's StatFin database. *** Significant at the 0.1% level. ** Significant at the 1% level. * Significant at the 5% level. † Significant at the 10% level.    A Description of municipality-specific time-varying controls • Log of total population -to capture demographic dynamics (Barone et al., 2016).
• Population density (inhabitants per km 2 ; proxy for urbanization) -far-right parties tend to gather larger support among people from rural municipalities.
• Share of women in the adult population -women tend to be less supportive of the Finns Party (Niemi, 2012).
• Share of old people in the adult population (65 and above) -far-right parties generally score high points among old people (appeal to tradition, conservatism, etc.).
• Total crime rate (crimes per 100,000 inhabitants) -far-right parties often campaign on issues related to law and order. Higher crime rate might therefore lead to higher Finns Party's popularity.
• Unemployment rate -poor economic performance of a municipality reflected in high unemployment rate is expected to be a strong predictor of far-right support.
• Share of population (25-64) with tertiary education -people with university education are less likely to accept nationalist-populist agenda, and therefore are less likely to vote for the far-right parties.
• Skill ratio (skilled/unskilled workers) -proxied by the number of people (aged 20 or above) with education levels 2 and 3 divided by the number of people with education level 1 (Mayda, 2006 Table A.5. Overall, the analysis suggests that outliers do not drive the main IV estimates. Standard errors in parentheses, clustered at municipality level. All regressions control for municipality fixed effects, election year fixed effects, region-by-election year fixed effects, and the following municipality-specific time-varying controls (in lagged form): log of population, population density, share of females, share of tertiary educated, share of aged 65+, ratio of skilled to unskilled labor, total crime rate, unemployment rate, median household income. Data comes from Statistics Finland's StatFin database. *** Significant at the 0.1% level. ** Significant at the 1% level. * Significant at the 5% level. † Significant at the 10% level. Notes -Finns Party -Finns Party's share of valid votes. Standard errors in parentheses, clustered at respective levels (municipality, subregion, region). All regressions control for election year fixed effects, and the following municipality/subregion/regionspecific time-varying controls (in lagged form): log of population, population density, share of females, share of tertiary educated, share of aged 65+, ratio of skilled to unskilled labor, total crime rate, unemployment rate, median household income. Data comes from Statistics Finland's StatFin database. *** Significant at the 0.1% level. ** Significant at the 1% level. * Significant at the 5% level. † Significant at the 10% level. Standard errors in parentheses, clustered at municipality level. All regressions control for municipality fixed effects, election year fixed effects, region-by-election year fixed effects, and the following municipality-specific time-varying controls (in lagged form): log of population, population density, share of females, share of tertiary educated, share of aged 65+, ratio of skilled to unskilled labor, total crime rate, unemployment rate, median household income. Data comes from Statistics Finland's StatFin database. *** Significant at the 0.1% level. ** Significant at the 1% level. * Significant at the 5% level. † Significant at the 10% level. Notes -Voter turnout -share of eligible voters who cast ballot in election. Protest vote -share of invalid ballots. Standard errors in parentheses, clustered at municipality level. Both regressions control for municipality fixed effects, election year fixed effects, region-by-election year fixed effects, and the following municipality-specific time-varying controls (in lagged form): log of population, population density, share of females, share of tertiary educated, share of aged 65+, ratio of skilled to unskilled labor, total crime rate, unemployment rate, median household income. Data comes from Statistics Finland's StatFin database. *** Significant at the 0.1% level. ** Significant at the 1% level. * Significant at the 5% level. † Significant at the 10% level. Notes -Data comes from Statistics Finland's StatFin database.