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Immigration, trade and productivity in services: evidence from UK firms

Listed author(s):
  • Gianmarco I. P. Ottaviano
  • Giovanni Peri
  • Greg C. Wright

This paper explores the impact of immigrants on the imports, exports and productivity of serviceproducing firms in the U.K. Immigrants may substitute for imported intermediate inputs (offshore production) and they may impact the productivity of the firm as well as its export behavior. The first effect can be understood as the re-assignment of offshore productive tasks to immigrant workers. The second can be seen as a productivity or cost cutting effect due to immigration, and the third as the effect of immigrants on specific bilateral trade costs. We test the predictions of our model using differences in immigrant inflows across U.K. labor markets, instrumented with an enclave-based instrument that distinguishes between aggregate and bilateral immigration, as well as immigrant diversity. We find that immigrants increase overall productivity in service-producing firms, revealing a cost cutting impact on these firms. Immigrants also reduce the extent of country-specific offshoring, consistent with a reallocation of tasks and, finally, they increase country-specific exports, implying an important role in reducing communication and trade costs for services.

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File URL: http://eprints.lse.ac.uk/62583/
File Function: Open access version.
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Paper provided by London School of Economics and Political Science, LSE Library in its series LSE Research Online Documents on Economics with number 62583.

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Length: 43 pages
Date of creation: May 2015
Handle: RePEc:ehl:lserod:62583
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Web page: http://www.lse.ac.uk/

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  2. Felbermayr, Gabriel & Grossmann, Volker & Kohler, Wilhelm, 2012. "Migration, International Trade and Capital Formation: Cause or Effect?," IZA Discussion Papers 6975, Institute for the Study of Labor (IZA).
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  5. Mette Foged & Giovanni Peri, 2015. "Immigrants' Effect on Native Workers: New Analysis on Longitudinal Data," CReAM Discussion Paper Series 1507, Centre for Research and Analysis of Migration (CReAM), Department of Economics, University College London.
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  10. Ottaviano, Gianmarco & Peri, Giovanni & Wright, Greg C., 2010. "Immigration, Offshoring and American Jobs," CEPR Discussion Papers 8078, C.E.P.R. Discussion Papers.
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  13. Murat Genc & Masood Gheasi & Peter Nijkamp & Jacques Poot, 2011. "The impact of immigration on international trade: a meta-analysis," Norface Discussion Paper Series 2011020, Norface Research Programme on Migration, Department of Economics, University College London.
  14. Francesco Caselli & Wilbur John Coleman II, 2006. "The World Technology Frontier," American Economic Review, American Economic Association, vol. 96(3), pages 499-522, June.
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  16. Giovanni Peri & Kevin Shih & Chad Sparber, 2013. "STEMWorkers, H1B Visas and Productivity in US Cities," Norface Discussion Paper Series 2013009, Norface Research Programme on Migration, Department of Economics, University College London.
  17. Giovanni Peri & Chad Sparber, 2009. "Task Specialization, Immigration, and Wages," American Economic Journal: Applied Economics, American Economic Association, vol. 1(3), pages 135-169, July.
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  19. Breinlich, Holger & Criscuolo, Chiara, 2010. "International Trade in Services: A Portrait of Importers and Exporters," CEPR Discussion Papers 7837, C.E.P.R. Discussion Papers.
  20. Gianmarco I.P. Ottaviano & Giovanni Peri, 2006. "The economic value of cultural diversity: evidence from US cities," Journal of Economic Geography, Oxford University Press, vol. 6(1), pages 9-44, January.
  21. Tim Hatton, 2004. "Explaining Trends in UK Immigration," ANU Working Papers in Economics and Econometrics 2004-440, Australian National University, College of Business and Economics, School of Economics.
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  23. Gianmarco Ottaviano & Thierry Mayer, . "The happy few: the internationalisation of European firms," Blueprints, Bruegel, number 12, March.
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  25. Paul Beaudry & Mark Doms & Ethan Lewis, 2010. "Should the Personal Computer Be Considered a Technological Revolution? Evidence from U.S. Metropolitan Areas," Journal of Political Economy, University of Chicago Press, vol. 118(5), pages 988-1036.
  26. Paul Beaudry & David A. Green, 2005. "Changes in U.S. Wages, 19762000: Ongoing Skill Bias or Major Technological Change?," Journal of Labor Economics, University of Chicago Press, vol. 23(3), pages 609-648, July.
  27. James E. Rauch & Vitor Trindade, 2002. "Ethnic Chinese Networks In International Trade," The Review of Economics and Statistics, MIT Press, vol. 84(1), pages 116-130, February.
  28. Ortega, Francesc & Peri, Giovanni, 2014. "Openness and income: The roles of trade and migration," Journal of International Economics, Elsevier, vol. 92(2), pages 231-251.
  29. L H Kahane & N Longley & R Simmons, 2009. "The Effects of Coworker Heterogeneity on Firm-Level Output: Assessing the Impacts of Cultural and Language Diversity in the National Hockey League," Working Papers 599378, Lancaster University Management School, Economics Department.
  30. Bartel, Ann P, 1989. "Where Do the New U.S. Immigrants Live?," Journal of Labor Economics, University of Chicago Press, vol. 7(4), pages 371-391, October.
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