The Economic Impact of Migration: Productivity Analysis for Spain and the United Kingdom

Kangasniemi, Mari and Mas, Matilde and Robinson, Catherine and Serrano, Lorenzo (2009): The Economic Impact of Migration: Productivity Analysis for Spain and the United Kingdom. Published in: Documentos de Trabajo - Fundación BBVA No. 10 (2009)

Abstract

Increased internationalization over the past 20 years has meant that labour has become increasingly mobile, and whilst employment and earnings effects have been extensively analysed in host and source nations, the implications for firm and industry performance have been largely ignored. This paper explores the direct economic consequences of immigration on host nations’ productivity performance at a sectoral level. We consider its impact in two very different European countries, Spain and the UK. Whilst the UK has traditionally had a substantial in-flow of migration, for Spain, the phenomenon is much more recent. The paper provides an overview of the role played by immigration on per capita income, highlighting the importance of demographic differences. We then go on to analyze the role of migration on productivity using two different approaches: i) growth accounting methodology and ii) econometric estimation of a production function. Our findings indicate that migration has had very different implications for Spain and the UK, migrants being more productive than natives in the UK but less productive than natives in Spain. This may in part be a function of different immigration policies, particularly related to the skill requirements on entry, but also in part a feature of the host nations’ ability to ‘absorb’ foreign labour.

• Item Type: MPRA Paper
• Language: English
• Keywords: Key words: migration, productivity, industries
• Subjects: O - Economic Development, Innovation, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity > O40 - General; J - Labor and Demographic Economics > J3 - Wages, Compensation, and Labor Costs > J30 - General; J - Labor and Demographic Economics > J2 - Demand and Supply of Labor > J20 - General

References

Amuedo-Dorantes, C. and S. de la Rica (2008): “Does Immigration Raises Native´s Income? National and Regional Evidence from Spain », FEDEA, Working Paper 2008-17 (May)

Angrist, J. and A. Kugler, (2003) “Protective or Counter-Productive? Labor Market Institutions and the Effect of Immigrations on EU Natives", Economic Journal, 113, F302-F331.

Bauer, T. and A. Kunze, (2004) “The Demand for High-Skilled Workers and Immigration Policy.” CEPR Discussion Paper No. 4274.

Blackorby, C. and R. R. Russell, (1989) “Will the Real Elasticity of Substitution Please Stand Up? (A Comparison of the Allen/Uzawa and Morishima Elasticities).” American Economic Review, 79 (4 ), 882-888.

Blundell, R. and S. R. Bond, (2000) “GMM Estimation with Persistent Panel Data: An Application to Production Functions.” Econometric Reviews.19(3): 321-40.

Borjas, G., (1999) "The Economic Analysis of Immigration," in Handbook of Labor Economics, Volume 3A, edited by Orley Ashenfelter and David Card, North-Holland, 1697-1760.

Borjas, G., (2003) "The Labour Demand Cure IS Downwards Sloping: Re-examining the Impact of Immigration on the Labour Market," Quarterly Journal of Economics, 188, 1335-1374.

Card, D., (1990) “The Impact of the Mariel Boatlift on the Miami Labor Market.” Industrial and Labor Relations Review, 43(2), 245-57.

Card, D., (2001) “Immigrant Inflows, Native Outflows, and the Local Labor Market Impacts of Higher Immigration.” Journal of Labor Economics, 19(1), 22-64.

Card, D. and J. DiNardo (2000) “Do Immigrant Inflows Lead to Native Outflows?”, American Economic Review, 90(2), 360-67.

Card, D., (2005) “Is the New Immigration Really So Bad?” Economic Journal, 115, F300-F323.

Carrasco, R., J.F Jimeno, and C. Ortega, (2007) “El efecto de la inmigración sobre las condiciones de los trabajadores autóctonos en el mercado de trabajo. Evidencia para España”, in Dolado, J.J. and P. Vázquez, eds.

Christensen, L. R., D. W. Jorgenson and L. J. Lau, (1973) “Transcendental Logarithmic Production Frontiers”, Review of Economics and Statistics, 55(1), 28-45.

Conde-Ruiz, J.I., García, J.R.and M. Navarro: “Inmigration and Regional Growth in Spain, FEDEA, Working Paper 2008-08 (April)

Costello, D., (1993) “A cross-country, cross-industry comparison of productivity growth. Journal of Political Economy 101 (2), 207-222

Dolado, J.J. and P. Vázquez, eds., (2007) “Ensayos sobre los efectos económicos de la inmigración en España,” Fundación de Estudios de Economía Aplicada, FEDEA, Madrid.

Friedberg, R. M and J. Hunt, (1995) "The Impact of Immigrants on Host Country Wages, Employment and Growth," Journal of Economic Perspectives, 9(2), 23-44.

Griliches, Z and J. Mairesse, (1995) "Production Functions: The Search for Identification," NBER Working Papers 5067, National Bureau of Economic Research, Inc.

Grossman, J. B., (1982) “The Substitutability of Natives and Immigrants in Production.” Review of Economics and Statistics, 64(4), 596-603.

Hamermesh, D. S. and J. Grant, (1979) “Econometric studies of labor-labor substitution and their implications for policy.” Journal of Human Resources, XIV(4), 518–542.

Hatton, T. J., (2005) “Explaining trends in UK immigration”, Journal of Population Economics, 18, 719-740.

Heyer E.,F. Pelgrin and A. Sylvain, (2004) "Translog ou Cobb-Douglas? Le rôle des durées d'utilisation des facteurs," Bank of Canada Working Papers 04-19.

Hitt L. M. and E. M. Snir, (1999) “The Role of Information Technology in Modern Production: Complement or Substitute to Other Inputs,” Mimeo

Huntoon, L., (1998) “Immigration to Spain: implications for a unified European Union Immigration Policy”, International Migration Review, 32 (2); 423-450.

Jorgenson, D. W., F. Gollop and B. M. Fraumeni, (1987) “Productivity and U.S. economic growth” Harvard Economic Studies, 159, Cambridge, Mass.: Harvard University Press, 567.

Levinsohn J. and A. Petrin, (2003) "Estimating Production Functions Using Inputs to Control for Unobservables," Review of Economic Studies, 317-342.

Lewis, E., (2005) “Immigration, Skill Mix and the Choice of Technique”, Federal Reserve Bank of Philadelphia, Working Paper No. 05-8.

Manacorda, M., A. Manning, and J. Wadsworth, (2006) “The Impact of Immigration on the Structure of Male Wages: Theory and Evidence from Britain” Centre for Economic Performance Discussion Paper 754.

Marimon, R., and F. Zilibotti, (1998) “Actual´ versus `virtual´ employment in Europe. Is Spain different?” European Economic Review 42, 123-153.

Mattoo, A., K. E. Maskus, and G. Chellaraj, (2005) “The contribution of skilled immigration and international graduate students to U.S. innovation.” The World Bank, Policy Research Working Paper: 3588.

Moen, J., (2005) “Is Mobility of Technical Personnel a Source of R&D Spillovers?”, Journal of Labor Economics, 23(1), 81-114.

Office for National Statistics. Social and Vital Statistics Division and Northern Ireland Statistics and Research Agency. Central Survey Unit, Quarterly Labour Force Survey files, 1992-2005 [computer files]. Colchester, Essex: UK Data Archive [distributor].

Office of Population Censuses and Surveys. Social Survey Division, Annual Labour Force Survey files, 1984-1991 [computer files]. Colchester, Essex: UK Data Archive[distributor].

Olley G. S. and A. Pakes (1996) “The Dynamics of Productivity in the Telecommunications Equipment Industry” Econometrica, 64 (6), 1263-1297.

Ottaviano, G. I.P. and P. Giovanni, (2006) "Rethinking the Effects of Immigration on Wages," NBER Working Paper 12497.

Roodman, D., (2006) "How to Do xtabond2: An Introduction to "Difference" and "System" GMM in Stata," Center for Global Development Working Paper 103.

Salt, J. and J. Millar, (2006) “Foreign labour in the UK: current patterns and trends”, Labour Market Trends, 114 (10), 335-355.

Stockman, A., (1988) “Sectoral and national aggregate disturbances to industrial output in seven European countries”, Journal of Monetary Economics 21, 387-409.