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

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  • Paserman, M. 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.

Suggested Citation

  • Paserman, M. Daniele, 2008. "Do High-Skill Immigrants Raise Productivity? Evidence from Israeli manufacturing Firms, 1990-1999," CEPR Discussion Papers 6896, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:6896
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    1. 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.
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    Cited by:

    1. Peter Huber & Gabriele Tondl, 2012. "Migration and regional convergence in the European Union," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 39(4), pages 439-460, November.
    2. Libertad González & Francesc Ortega, 2014. "How do Open Economies Adjust to Large Immigration Flows? Sectoral Specialization, Household Services, and Other Mechanisms," ifo DICE Report, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 12(2), pages 03-09, 07.
    3. Jennifer Hunt & Marjolaine Gauthier-Loiselle, 2010. "How Much Does Immigration Boost Innovation?," American Economic Journal: Macroeconomics, American Economic Association, vol. 2(2), pages 31-56, April.
    4. repec:ces:ifodic:v:12:y:2014:i:2:p:19116203 is not listed on IDEAS
    5. Marcus H. Böhme & Sarah Kups, 2017. "The economic effects of labour immigration in developing countries: A literature review," OECD Development Centre Working Papers 335, OECD Publishing.
    6. Jennifer Hunt, 2011. "Which Immigrants Are Most Innovative and Entrepreneurial? Distinctions by Entry Visa," Journal of Labor Economics, University of Chicago Press, vol. 29(3), pages 417-457.
    7. Yannu Zheng & Olof Ejermo, 2015. "How do the foreign-born perform in inventive activity? Evidence from Sweden," Journal of Population Economics, Springer;European Society for Population Economics, vol. 28(3), pages 659-695, July.
    8. 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.
    9. Lewis, Ethan & Peri, Giovanni, 2015. "Immigration and the Economy of Cities and Regions," Handbook of Regional and Urban Economics, Elsevier.
    10. Binnur Balkan & Semih Tumen, 2016. "Immigration and prices: quasi-experimental evidence from Syrian refugees in Turkey," Journal of Population Economics, Springer;European Society for Population Economics, vol. 29(3), pages 657-686, July.
    11. repec:taf:rjapxx:v:20:y:2015:i:4:p:594-612 is not listed on IDEAS
    12. Thomas Kemeny & Abigail Cooke, 2018. "Spillovers from immigrant diversity in cities," Journal of Economic Geography, Oxford University Press, vol. 18(1), pages 213-245.
    13. Daniel Felsenstein, 2015. "Factors Affecting Regional Productivity and Innovation in Israel: Some Empirical Evidence," Regional Studies, Taylor & Francis Journals, vol. 49(9), pages 1457-1468, September.
    14. Ghosh, Anirban & Mayda, Anna Maria & Ortega, Francesc, 2014. "The Impact of Skilled Foreign Workers on Firms: An Investigation of Publicly Traded U.S. Firms," IZA Discussion Papers 8684, Institute for the Study of Labor (IZA).
    15. Bonin, Holger, 2017. "Report No. 75: The Potential Economic Benefits of Education of Migrants in the EU," IZA Research Reports 75, Institute for the Study of Labor (IZA).
    16. Deahoon Nahm & Massimiliano Tani, 2015. "Skilled immigrants' contribution to productive efficiency," Journal of the Asia Pacific Economy, Taylor & Francis Journals, vol. 20(4), pages 594-612, October.
    17. Stephan Kampelmann & François Rycx, 2016. "Wage discrimination against immigrants: measurement with firm-level productivity data," IZA Journal of Migration, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 5(1), pages 1-24, December.
    18. Amelie F. Constant, 2014. "Do migrants take the jobs of native workers?," IZA World of Labor, Institute for the Study of Labor (IZA), pages 1-10, May.
    19. HASHIMOTO Yuki, 2017. "Highly Skilled Immigrants' Occupational Choices and the Japanese Employment System," Discussion papers 17059, Research Institute of Economy, Trade and Industry (RIETI).

    More about this item

    Keywords

    Immigration; Productivity;

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration
    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers

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