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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. Cohen-Goldner, Sarit & Paserman, Marco Daniele, 2004. "The Dynamic Impact of Immigration on Natives' Labour Market Outcomes: Evidence from Israel," CEPR Discussion Papers 4640, C.E.P.R. Discussion Papers.
  2. Card, David, 2004. "Is the New Immigration Really So Bad?," IZA Discussion Papers 1119, Institute for the Study of Labor (IZA).
  3. 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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  5. 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.
  6. 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.
  7. 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.
  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. 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.
  10. 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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  12. 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.
  13. 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.
  14. Ethan Lewis, 2005. "Immigration, skill mix, and the choice of technique," Working Papers 05-8, Federal Reserve Bank of Philadelphia.
  15. 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.
  16. 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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  20. Eckstein, Z. & Weiss, Y., 1999. "The Integration of Immigrants from the Former Soviet Union in the Israeli Labor Market," Papers 33-99, Tel Aviv.
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Citations

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Cited by:
  1. Jennifer Hunt & Marjolaine Gauthier-Loiselle, 2008. "How Much Does Immigration Boost Innovation?," NBER Working Papers 14312, National Bureau of Economic Research, Inc.
  2. Jennifer Hunt, 2009. "Which Immigrants Are Most Innovative and Entrepreneurial? Distinctions by Entry Visa," NBER Working Papers 14920, National Bureau of Economic Research, Inc.
  3. 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.
  4. Peter Huber & Gabriele Tondl, 2012. "Migration and regional convergence in the European Union," Empirica, Springer, vol. 39(4), pages 439-460, November.
  5. 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.

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