Do we need more immigration? Socio-cultural diversity and export sophistication in EU 28 countries

One of the main concerns for policymakers is the ability of their nations to grow and to provide their citizens with a better standard of living. In a globalized world, this ability is increasingly being linked with the ability to export and structure of exported products. It is widely held that sophisticated knowledge and technology-intensive products offer higher prospects for growth than standardized price competitive goods. Ever since the work of Schumpeter migrations have been considered as an important driver of entrepreneurship, innovation, and technological progress. The social and professional networks of foreign-born individuals mobilize information, know-how, skills and capital to start new firms. They also provide valuable contacts and resources for both resident and newly arrived immigrants. Yet, the existing literature notes that the impact of immigration on innovations in the EU is smaller than that in the USA due to the greater cultural and institutional barriers in the former entity. The understanding of the immigrant role in the economic performance of the EU is particularly important since the growth of the foreign-born population in the EU has been faster than anywhere else in the world. Recent waves of EU enlargement and immigration pressures from other parts of the world have further facilitated this trend. Bearing above said in mind this paper explores the relationship between export sophistication and immigration in EU28 countries over the 2006-2015 period. A dynamic panel estimator is used to discern between short and long-run effects of immigration on the international competitiveness of EU economies. Our results suggest that greater socio-economic diversity increases the sophistication of exports in both the short and long run. The long-run effects are about twice as large than short-run ones.