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Lifting productivity growth via immigration

Geoff Riley

2nd May 2018

International migration, particularly of skilled people, is an important influence on the diffusion of knowledge across national borders, promoting export diversification in both receiving and sending countries. Policies that provide incentives for temporary migration may therefore be a highly efficient way for firms and countries to access new knowledge and thereby to boost productivity growth. These are the conclusions of research by Dany Bahar and Hillel Rapoport, published in the Economic Journal.

Their study finds that migrants from countries that are competitive in exporting a particular product raise the likelihood that the countries to which they move will become competitive exporters of that product too. Migrants also explain the appearance of new goods in the export basket of the sending country.

The researchers note that economic migration has become an increasingly hotly debated issue in recent years, particularly highlighted in 2016 by the US presidential election and the UK’s referendum on EU membership. There seems to be growing sentiment that immigrants add pressure to existing infrastructure and leave fewer jobs for the locals. But these fears are often not based in evidence and overlook the gains to host economies.

The new study analyses data on international migration and trade between over 100 countries during the period from 1990 to 2010. The main finding is that a 10% increase in the immigrant stock from country exporters of a certain good can explain a 2% rise in the probability of the receiving country exporting this same good to the rest of the world during the following decade, competitively and from scratch.

Geoff Riley

Geoff Riley FRSA has been teaching Economics for over thirty years. He has over twenty years experience as Head of Economics at leading schools. He writes extensively and is a contributor and presenter on CPD conferences in the UK and overseas.

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