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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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  1. David Card, 2004. "Is the New Immigration Really So Bad?," CReAM Discussion Paper Series 0402, Centre for Research and Analysis of Migration (CReAM), Department of Economics, University College London.
  2. Cohen-Goldner, Sarit & Eckstein, Zvi, 2010. "Estimating the return to training and occupational experience: The case of female immigrants," Journal of Econometrics, Elsevier, vol. 156(1), pages 86-105, May.
  3. Hellerstein, Judith K & Neumark, David, 1999. "Sex, Wages, and Productivity: An Empirical Analysis of Israeli Firm-Level Data," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 40(1), pages 95-123, February.
  4. 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.
  5. Ethan Lewis, 2005. "Immigration, skill mix, and the choice of technique," Working Papers 05-8, Federal Reserve Bank of Philadelphia.
  6. Neil Gandal & Gordon H. Hanson & Matthew J. Slaughter, 2000. "Technology, Trade, and Adjustment to Immigration in Israel," NBER Working Papers 7962, National Bureau of Economic Research, Inc.
  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, December.
  8. George J. Borjas, 2003. "The Labor Demand Curve Is Downward Sloping: Reexamining The Impact Of Immigration On The Labor Market," The Quarterly Journal of Economics, MIT Press, vol. 118(4), pages 1335-1374, November.
  9. 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.
  10. Cohen-Goldner, Sarit & Paserman, M. Daniele, 2011. "The dynamic impact of immigration on natives' labor market outcomes: Evidence from Israel," European Economic Review, Elsevier, vol. 55(8), pages 1027-1045.
  11. Kangasniemi, M. & Mas, Matilde & Robinson, C. & Serrano, Lorenzo, 2008. "The Economic Impact of Migration – Productivity Analysis for Spain and the UK," MPRA Paper 15835, University Library of Munich, Germany, revised 2008.
  12. Peter Huber & Michael Landesmann & Catherine Robinson & Robert Stehrer, 2010. "Migrants’ Skills and Productivity: A European Perspective," National Institute Economic Review, National Institute of Economic and Social Research, vol. 213(1), pages R20-R34, July.
  13. Zvi Eckstein & Yoram Weiss, 2004. "On The Wage Growth of Immigrants: Israel, 1990-2000," Journal of the European Economic Association, MIT Press, vol. 2(4), pages 665-695, 06.
  14. Rachel M. Friedberg & J. Hunt, 1995. "The Impact of Immigrants on Host Country Wages, Employment and Growth," Working Papers 95-5, Brown University, Department of Economics.
  15. 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.
  16. Jones, Patricia, 2001. "Are educated workers really more productive?," Journal of Development Economics, Elsevier, vol. 64(1), pages 57-79, February.
  17. Judith K. Hellerstein & David Neumark & Kenneth R. Troske, 1996. "Wages, Productivity, and Worker Characteristics: Evidence from Plant-Level Production Functions and Wage Equations," NBER Working Papers 5626, National Bureau of Economic Research, Inc.
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  19. Griliches, Zvi & Regev, Haim, 1995. "Firm productivity in Israeli industry 1979-1988," Journal of Econometrics, Elsevier, vol. 65(1), pages 175-203, January.
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Cited by:
  1. Gabriele Tondl & Peter Huber, 2011. "Migration and Regional Convergence in the European Union," ERSA conference papers ersa11p1761, European Regional Science Association.
  2. Jennifer Hunt & Marjolaine Gauthier-Loiselle, 2008. "How Much Does Immigration Boost Innovation?," Departmental Working Papers 2008-07, McGill University, Department of Economics.
  3. Hunt, Jennifer, 2010. "Which Immigrants Are Most Innovative and Entrepreneurial: Distinctions by Entry Visa," CEPR Discussion Papers 7699, C.E.P.R. Discussion Papers.
  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.
  5. Libertad González & Francesc Ortega, 2014. "How do Open Economies Adjust to Large Immigration Flows? Sectoral Specialization, Household Services, and Other Mechanisms," CESifo DICE Report, Ifo Institute for Economic Research at the University of Munich, vol. 12(2), pages 03-09, 07.

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