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Welcome to the machine: firms' reaction to low-skilled immigration

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  • Antonio Accetturo

    ()
    (Bank of Italy)

  • Matteo Bugamelli

    ()
    (Bank of Italy)

  • Andrea Lamorgese

    ()
    (Bank of Italy)

Abstract

We assess the impact of low-skilled immigration on capital intensity. We first present a model characterized by frictions in the labor market and firms' asymmetric information on workers' skills and show that firms can react to the immigration-induced reduction of their workforce's skill level by increasing the capital-labor ratio. We test the predictions of the model on a sample of Italian manufacturing firms over the period 1996-2007, finding that increased immigration of low-skilled workers from developing countries, measured at the provincial level and instrumented with pre-existing enclaves of immigrants and network effects, raises capital intensity. In line with the predictions of the theoretical model, the impact of immigration, which is quite robust across empirical specifications, is stronger for larger firms and in skill-intensive sectors.

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Bibliographic Info

Paper provided by Bank of Italy, Economic Research and International Relations Area in its series Temi di discussione (Economic working papers) with number 846.

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Date of creation: Jan 2012
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Handle: RePEc:bdi:wptemi:td_846_12

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Keywords: capital intensity; low-skilled migration; firm heterogeneity;

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References

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  1. David Card & Ethan G. Lewis, 2007. "The Diffusion of Mexican Immigrants During the 1990s: Explanations and Impacts," NBER Chapters, in: Mexican Immigration to the United States, pages 193-228 National Bureau of Economic Research, Inc.
  2. Ethan Lewis, 2003. "Local, open economies within the U.S.: how do industries respond to immigration?," Working Papers 04-1, Federal Reserve Bank of Philadelphia.
  3. Elena Bontempi & Roberto Golinelli & Giuseppe Parigi, 2007. "Why demand uncertainty curbs investment: Evidence froma a panel of Italian manufacturing firms," Temi di discussione (Economic working papers) 621, Bank of Italy, Economic Research and International Relations Area.
  4. Iranzo, Susana & Schivardi, Fabiano & Tosetti, Elisa, 2006. "Skill Dispersion and Firm Productivity: An Analysis with Employer-Employee Matched Data," CEPR Discussion Papers 5539, C.E.P.R. Discussion Papers.
  5. Mortensen, Dale T & Pissarides, Christopher A, 1994. "Job Creation and Job Destruction in the Theory of Unemployment," Review of Economic Studies, Wiley Blackwell, vol. 61(3), pages 397-415, July.
  6. Ethan Lewis, 2005. "Immigration, Skill Mix, and the Choice of Technique," Working Papers 05-04, Center for Economic Studies, U.S. Census Bureau.
  7. Elhanan Helpman & Oleg Itshoki & Stephen Redding, 2009. "Inequality and unemployment in a global economy," LSE Research Online Documents on Economics 25501, London School of Economics and Political Science, LSE Library.
  8. P. Diamond, 1980. "Aggregate Demand Management in Search Equilibrium," Working papers 268, Massachusetts Institute of Technology (MIT), Department of Economics.
  9. Matteo Bugamelli & Fabiano Schivardi & Roberta Zizza, 2010. "The Euro and Firm Restructuring," NBER Chapters, in: Europe and the Euro, pages 99-138 National Bureau of Economic Research, Inc.
  10. Mark Doms & Timothy Dunne, 1994. "Capital Adjustment Patterns in Manufacturing Plants," Working Papers 94-11, Center for Economic Studies, U.S. Census Bureau.
  11. Bianco, Madga & Golinelli, Roberto & Parigi, Giuseppe, 2009. "Family firms and investments," MPRA Paper 19247, University Library of Munich, Germany.
  12. Luigi Guiso & Giuseppe Parigi, 1999. "Investment And Demand Uncertainty," The Quarterly Journal of Economics, MIT Press, vol. 114(1), pages 185-227, February.
  13. George J. Borjas, 1994. "The Economics of Immigration," Journal of Economic Literature, American Economic Association, vol. 32(4), pages 1667-1717, December.
  14. Christian Dustmann & Albrecht Glitz, 2011. "How Do Industries and Firms Respond to Changes in Local Labor Supply?," CReAM Discussion Paper Series 1118, Centre for Research and Analysis of Migration (CReAM), Department of Economics, University College London.
  15. Bond, Stephen & Van Reenen, John, 2007. "Microeconometric Models of Investment and Employment," Handbook of Econometrics, in: J.J. Heckman & E.E. Leamer (ed.), Handbook of Econometrics, edition 1, volume 6, chapter 65 Elsevier.
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Cited by:
  1. Strom, Steinar & Venturini, Alessandra & Villosio, Claudia, 2013. "Wage Assimilation: Migrants versus Natives and Foreign Migrants versus Internal Migrants," Department of Economics and Statistics Cognetti de Martiis. Working Papers 201341, University of Turin.
  2. Barone, Guglielmo & Mocetti, Sauro, 2011. "With a little help from abroad: The effect of low-skilled immigration on the female labour supply," Labour Economics, Elsevier, vol. 18(5), pages 664-675, October.
  3. Giuseppe De Arcangelis & Edoardo Di Porto & Gianluca Santoni, 2014. "Immigration and Manufacturing In Italy.Evidence from the 2000s," Working Papers 1/14, Sapienza University of Rome, DISS.

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