Skilled migration and economic performances: Evidence from OECD countries

Gianluca Orefice

doi:10.1007/bf03399337

Abstract

Summary This paper investigates the effects of immigration flows and their human capital content on per capita GDP variation in 24 OECD host countries. Theoretical models concludes that the effect of immigrants in host country’s income depends on the human capital content of migrants (Benhabib, 1996); empirically the question is still open and this paper contributes to make light on this. So we propose an empirical estimation on the effects of immigrants and their human capital content on per capita GDP variation. Using a IV model to solve the endogeneity problem we found that high human capital content by immigrants has a positive effect on per capita GDP variation, but it is not enough to fully compensate the overall negative effects of migration on changes in per capita output.

Highlights

The aim of the paper is to investigate the effect of immigrants’ inflows on host country’s standard of living, by considering the effects on per capita GDP variation
We have to look at the IV estimation results, and we may conclude that a 1% increase in zero human capital endowed immigrants inflows variation leads to a 1.1% reduction in per capita GDP variation, but being skilled among immigrants mitigates this negative effect
Since the coefficient associated to the immigrants share is always greater than the coefficient associated to the interacted variable, we may conclude that being tertiary educated among immigrants positively affects per capita GDP but not enough to clear the negative effect of immigration

Summary

Introduction

The aim of the paper is to investigate the effect of immigrants’ inflows on host country’s standard of living, by considering the effects on per capita GDP variation. Up to now economists focused a lot, both theoretically and empirically, on the labor markets effects of immigration (Card, 2001 and 2005; Borjas, 2003; Aydemir and Borjas, 2007; Ottaviano and Peri, 2008), because the effects of immigration have been considered passing through the labor market, but it is just one outcome of interest (Hanson, 2008) This is certainly true and restrictive: immigration, by increasing the labor force, will reduce capital labor ratio in the host country, increasing return on capital and so generating investment opportunities and physical capital accumulation (up to the point in which the marginal product of capital returns to its pre-immigration shock value). Immigration may increase the host countries’ human capital endowment (according to their skill level) and so affecting per capita GDP variation (Goria, Dolado and Ichino, 1994) This is the channel we want to analyse by investigating the effects of high skilled immigrants on host countries’ changes in per capita GDP

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Results

Conclusion