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

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  • Paserman, Daniele

    ()
    (Boston University)

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 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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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 3572.

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Length: 44 pages
Date of creation: Jun 2008
Date of revision:
Publication status: published in: IZA Journal of Migration, 2013, 2:6
Handle: RePEc:iza:izadps:dp3572

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Keywords: productivity; immigration;

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References

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  1. 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.
  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. 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.
  4. 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.
  5. 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.
  6. Jones, Patricia, 2001. "Are educated workers really more productive?," Journal of Development Economics, Elsevier, vol. 64(1), pages 57-79, February.
  7. Eckstein, Zvi & Weiss, Yoram, 2003. "On the Wage Growth of Immigrants: Israel, 1990-2000," IZA Discussion Papers 710, Institute for the Study of Labor (IZA).
  8. Ethan Lewis, 2005. "Immigration, Skill Mix, and the Choice of Technique," Working Papers 05-04, Center for Economic Studies, U.S. Census Bureau.
  9. 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.
  10. 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.
  11. 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.
  12. 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.
  13. 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.
  14. 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.
  15. 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.
  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. Griliches, Zvi & Regev, Haim, 1995. "Firm productivity in Israeli industry 1979-1988," Journal of Econometrics, Elsevier, vol. 65(1), pages 175-203, January.
  18. 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.
  19. Eckstein, Z. & Weiss, Y., 1999. "The Integration of Immigrants from the Former Soviet Union in the Israeli Labor Market," Papers 33-99, Tel Aviv.
  20. Rachel M. Friedberg, 2001. "The Impact Of Mass Migration On The Israeli Labor Market," The Quarterly Journal of Economics, MIT Press, vol. 116(4), pages 1373-1408, November.
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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?," NBER Working Papers 14312, National Bureau of Economic Research, Inc.
  3. 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.
  4. Hunt, Jennifer, 2010. "Which Immigrants Are Most Innovative and Entrepreneurial? Distinctions by Entry Visa," IZA Discussion Papers 4745, Institute for the Study of Labor (IZA).
  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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