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Do High-Skill Immigrants Raise Productivity? Evidence from Israeli manufacturing Firms, 1990-1999

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  • Paserman, Marco Daniele

Abstract

During the second part of the 1990s, the Israeli economy experienced a surge in labour 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 has led some observers to comment that the high-skilled immigration wave was one of the main determinants for the fast growth of the Israeli economy in the 1990s. In this paper, 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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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 6896.

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Date of creation: Jul 2008
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Handle: RePEc:cpr:ceprdp:6896

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Keywords: Immigration; Productivity;

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  1. Cohen Goldner, Sarit & Eckstein, Zvi, 2004. "Estimating the Return to Training and Occupational Experience: The Case of Female Immigrants," IZA Discussion Papers 1225, Institute for the Study of Labor (IZA).
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  15. Mari Kangasniemi & Matilde Mas & Catherine Robinson & Lorenzo Serrano, 2012. "The economic impact of migration: productivity analysis for Spain and the UK," Journal of Productivity Analysis, Springer, Springer, vol. 38(3), pages 333-343, December.
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Cited by:
  1. Gauthier-Loiselle, Marjolaine & Hunt, Jennifer, 2009. "How Much Does Immigration Boost Innovation?," CEPR Discussion Papers, C.E.P.R. Discussion Papers 7116, C.E.P.R. Discussion Papers.
  2. Peter Huber & Gabriele Tondl, 2012. "Migration and regional convergence in the European Union," Empirica, Springer, Springer, vol. 39(4), pages 439-460, November.
  3. Hunt, Jennifer, 2010. "Which Immigrants Are Most Innovative and Entrepreneurial: Distinctions by Entry Visa," CEPR Discussion Papers, C.E.P.R. Discussion Papers 7699, C.E.P.R. Discussion Papers.
  4. Erik Hornung, 2014. "Immigration and the Diffusion of Technology: The Huguenot Diaspora in Prussia," American Economic Review, American Economic Association, vol. 104(1), pages 84-122, January.
  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, Ifo Institute for Economic Research at the University of Munich, vol. 12(2), pages 03-09, 07.
  6. Nahm, Daehoon & Tani, Massimiliano, 2014. "Skilled Immigrants' Contribution to Productive Efficiency," IZA Discussion Papers 8326, Institute for the Study of Labor (IZA).

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