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Do High-Skill Immigrants Raise Productivity? Evidence From Israeli Manufacturing Firms, 1990-1999

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  • M. Daniele Paserman

    ()
    (Department of Economics, Boston University and NBER)

Abstract

During the second part of the 1990s, the Israeli economy experienced a surge in labor productivity and total factor productivity, which was driven primarily by the manufacturing sector. This surge in productivity coincided with the full absorption and integration into the workforce of highly skilled immigrants from the former Soviet Union. The Soviet immigrants were disproportionately employed in manufacturing and, after an initial adjustment period, progressively moved into higher responsibility occupations where their skills could be put to use more efficiently. This paper assesses whether there is any causal link between high skilled immigration and productivity growth in the manufacturing sector. Specifically, I use a unique data set on Israeli manufacturing firms and investigate directly whether firms and industries with a higher concentration of immigrants experienced increases in productivity. The analysis shows that there is no correlation between immigrant concentration and productivity at the firm level in cross-sectional and pooled OLS regressions. First-differences estimates, which control for fixed unobserved differences between firms, reveal, if anything, a negative correlation between the change in output per worker and the change in the immigrant share. A more in-depth analysis reveals that the immigrant share was strongly negatively correlated with output and productivity in low-tech industries. In high-technology industries, the results tend to point to a positive relationship, hinting at complementarities between technology and the skilled immigrant workforce.

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Bibliographic Info

Paper provided by Boston University - Department of Economics in its series Boston University - Department of Economics - Working Papers Series with number WP2011-045.

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Length: 47 pages
Date of creation: Jan 2011
Date of revision:
Handle: RePEc:bos:wpaper:wp2011-045

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References

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  1. David Card, 2005. "Is the New Immigration Really So Bad?," NBER Working Papers 11547, National Bureau of Economic Research, Inc.
  2. Eckstein, Z. & Weiss, Y., 1999. "The Integration of Immigrants from the Former Soviet Union in the Israeli Labor Market," Papers 33-99, Tel Aviv.
  3. M. Daniele Paserman & Sarit Cohen-Goldner, 2010. "The dynamic impact of immigration on natives' labor market outcomes: Evidence from Israel," Boston University - Department of Economics - Working Papers Series WP2010-046, Boston University - Department of Economics.
  4. Rachel M. Friedberg & Jennifer Hunt, 1995. "The Impact of Immigrants on Host Country Wages, Employment and Growth," Journal of Economic Perspectives, American Economic Association, vol. 9(2), pages 23-44, Spring.
  5. Hellerstein, Judith K & Neumark, David & Troske, Kenneth R, 1999. "Wages, Productivity, and Worker Characteristics: Evidence from Plant-Level Production Functions and Wage Equations," Journal of Labor Economics, University of Chicago Press, vol. 17(3), pages 409-46, July.
  6. Eckstein, Zvi & Weiss, Yoram, 2003. "On the Wage Growth of Immigrants: Israel, 1990-2000," CEPR Discussion Papers 3770, C.E.P.R. Discussion Papers.
  7. Avi Ben-Bassat (ed.), 2002. "The Israeli Economy, 1985-1998: From Government Intervention to Market Economics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262025183, January.
  8. Enrico Moretti, 2004. "Workers' Education, Spillovers, and Productivity: Evidence from Plant-Level Production Functions," American Economic Review, American Economic Association, vol. 94(3), pages 656-690, June.
  9. Gandal, Neil & Hanson, Gordon H. & Slaughter, M.J.Matthew J., 2004. "Technology, trade, and adjustment to immigration in Israel," European Economic Review, Elsevier, vol. 48(2), pages 403-428, April.
  10. Jones, Patricia, 2001. "Are educated workers really more productive?," Journal of Development Economics, Elsevier, vol. 64(1), pages 57-79, February.
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  12. Hellerstein, J-K & Neumark, D, 1995. "Sex, Wages, and Productivity : an Empirical Analysis of Israeli, Firm-Level Data," Papers 9501, Michigan State - Econometrics and Economic Theory.
  13. Griliches, Zvi & Regev, Haim, 1995. "Firm productivity in Israeli industry 1979-1988," Journal of Econometrics, Elsevier, vol. 65(1), pages 175-203, January.
  14. Ethan Lewis, 2005. "Immigration, Skill Mix, and the Choice of Technique," Working Papers 05-04, Center for Economic Studies, U.S. Census Bureau.
  15. George J. Borjas, 2003. "The Labor Demand Curve is Downward Sloping: Reexamining the Impact of Immigration on the Labor Market," NBER Working Papers 9755, National Bureau of Economic Research, Inc.
  16. 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.
  17. Myriam Quispe-Agnoli & Madeline Zavodny, 2002. "The effect of immigration on output mix, capital, and productivity," Economic Review, Federal Reserve Bank of Atlanta, issue Q1, pages 17-27.
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Cited by:
  1. Jennifer Hunt, 2011. "Which Immigrants Are Most Innovative and Entrepreneurial? Distinctions by Entry Visa," Journal of Labor Economics, University of Chicago Press, vol. 29(3), pages 417 - 457.
  2. Gabriele Tondl & Peter Huber, 2011. "Migration and Regional Convergence in the European Union," ERSA conference papers ersa11p1761, European Regional Science Association.
  3. Hunt, Jennifer & Gauthier-Loiselle, Marjolaine, 2009. "How Much Does Immigration Boost Innovation?," IZA Discussion Papers 3921, Institute for the Study of Labor (IZA).
  4. Erik Hornung, 2011. "Immigration and the Diffusion of Technology: The Huguenot Diaspora in Prussia," Ifo Working Paper Series Ifo Working Paper No. 114, Ifo Institute for Economic Research at the University of Munich.

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