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Immigration, Trade and Productivity in Services: Evidence from U.K. Firms

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  • Gianmarco I.P. Ottaviano
  • Giovanni Peri
  • Greg C. Wright

Abstract

This paper explores the impact of immigrants on the imports, exports and productivity of service-producing 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.

Suggested Citation

  • Gianmarco I.P. Ottaviano & Giovanni Peri & Greg C. Wright, 2015. "Immigration, Trade and Productivity in Services: Evidence from U.K. Firms," NBER Working Papers 21200, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:21200
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    References listed on IDEAS

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    Cited by:

    1. Alicia Gómez–Tello & Rosella Nicolini, 2017. "Immigration and productivity: a Spanish tale," Journal of Productivity Analysis, Springer, vol. 47(2), pages 167-183, April.
    2. Parrotta, Pierpaolo & Pozzoli, Dario & Sala, Davide, 2016. "Ethnic diversity and firms' export behavior," European Economic Review, Elsevier, vol. 89(C), pages 248-263.
    3. Xu, Kun & Guan, Zhihua & Xu, Wenli, 2015. "省级财政支出效率空间溢出效应研究:基于超效率dea和gsm模型
      [Study on Spatial Spillover Effect of Provincial Fiscal Efficiency: Based on Super-Efficient DEA and GSM Model]
      ," MPRA Paper 71132, University Library of Munich, Germany.
    4. William W. Olney & Dario Pozzoli, 2018. "The Impact of Immigration on Firm-Level Offshoring," Department of Economics Working Papers 2018-02, Department of Economics, Williams College.
    5. Riccardo Fiorentini & Alina Verashchagina, 2017. "Immigration and Trade: The Case Study of Veneto Region in Italy," Working Papers 03/2017, University of Verona, Department of Economics.

    More about this item

    JEL classification:

    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • F6 - International Economics - - Economic Impacts of Globalization

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