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Misallocation of the immigrant workforce: Aggregate productivity effects for the host country

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  • Pulido, José
  • Varón, Alejandra

Abstract

Immigrants often face more obstacles in finding employment in their desired occupations than native workers, resulting in a larger misallocation of their workforce. This issue can decrease the host country’s aggregate labor productivity during large-scale migrations. Using a model of occupational choice that considers discrimination and other barriers for immigrants to find their desired occupations, we investigate the prevalence of these frictions and quantify the implied productivity losses for Colombia between 2015 and 2019, when the country received a mass migration from Venezuela. Our findings indicate that both frictions significantly misallocate Venezuelan immigrants. Removing them increase Colombian productivity by 0.9%, making the contribution of immigration to economic growth up to 29% larger. Our study thus highlights the importance of reducing barriers for immigrants in the labor market to enhance productivity and foster growth in the host country.

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  • Pulido, José & Varón, Alejandra, 2024. "Misallocation of the immigrant workforce: Aggregate productivity effects for the host country," Economic Modelling, Elsevier, vol. 130(C).
    • Handle: RePEc:eee:ecmode:v:130:y:2024:i:c:s0264999323002870
    DOI: 10.1016/j.econmod.2023.106475
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    1. Central Bank of Colombia, 2023. "The labour market in Colombia: trends, cyclical patterns and the role of wages in the recent inflationary surge," BIS Papers chapters, in: Bank for International Settlements (ed.), Inflation and labour markets, volume 127, pages 103-134, Bank for International Settlements.
    2. Ana María Tribín-Uribe & Achyuta Adhvaryu & Cesar Anzola-Bravo & Oscar Ávila-Montealegre & Leonardo Bonilla-Mejía & Juan Carlos Castro-Fernández & Luz A. Flórez & Ánderson Grajales-Olarte & Alexander , 2020. "Migración desde Venezuela en Colombia: caracterización del fenómeno y análisis de los efectos macroeconómicos," Revista ESPE - Ensayos sobre Política Económica, Banco de la Republica de Colombia, issue 97, pages 1-74, October.

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    More about this item

    Keywords

    Immigration; Misallocation; Roy model; Discrimination; Productivity;
    All these keywords.

    JEL classification:

    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers
    • O24 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Trade Policy; Factor Movement; Foreign Exchange Policy

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