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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: immigration; productivity;

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References

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  1. 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.
  2. 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.
  3. 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.
  4. Card, David, 2004. "Is the New Immigration Really So Bad?," IZA Discussion Papers 1119, Institute for the Study of Labor (IZA).
  5. 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.
  6. 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.
  7. Eckstein, Z. & Weiss, Y., 1999. "The Integration of Immigrants from the Former Soviet Union in the Israeli Labor Market," Papers 33-99, Tel Aviv.
  8. Griliches, Zvi & Regev, Haim, 1995. "Firm productivity in Israeli industry 1979-1988," Journal of Econometrics, Elsevier, vol. 65(1), pages 175-203, January.
  9. Ethan Lewis, 2005. "Immigration, Skill Mix, and the Choice of Technique," Working Papers 05-04, Center for Economic Studies, U.S. Census Bureau.
  10. Eckstein, Zvi & Weiss, Yoram, 2003. "On the Wage Growth of Immigrants: Israel, 1990-2000," CEPR Discussion Papers 3770, C.E.P.R. Discussion Papers.
  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, January.
  12. Jones, Patricia, 2001. "Are educated workers really more productive?," Journal of Development Economics, Elsevier, vol. 64(1), pages 57-79, February.
  13. 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.
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  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. 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.
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Cited by:
  1. Peter Huber & Gabriele Tondl, 2012. "Migration and Regional Convergence in the European Union," WIFO Working Papers 419, WIFO.
  2. Jennifer Hunt & Marjolaine Gauthier-Loiselle, 2008. "How Much Does Immigration Boost Innovation?," NBER Working Papers 14312, National Bureau of Economic Research, Inc.
  3. Jennifer Hunt, 2009. "Which Immigrants Are Most Innovative and Entrepreneurial? Distinctions by Entry Visa," NBER Working Papers 14920, National Bureau of Economic Research, Inc.
  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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