2SLS Estimator Research Articles

Can military-experienced CEOs improve corporate outcomes?

Purpose This paper aims to assess the role of CEOs with military experience in shaping corporate outcomes in Vietnam and provide new insights into how these unique backgrounds influence corporate financial decisions and firm performance within the specific context of an emerging market. Design/methodology/approach This study uses a comprehensive data set of 323 non-financial firms listed in Vietnam over 2013–2021 to examine the association between military-experienced CEOs and corporate outcomes. The authors apply propensity-score matching analysis to address potential endogeneity issues and use 2SLS estimation to show the mechanisms through which military CEOs affect firm performance. Findings The authors find that firms led by CEOs with military backgrounds outperform their counterparts lacking this experience. Furthermore, the findings indicate that firms helmed by military-experienced CEOs tend to make more investments and maintain lower (higher) short-term (long-term) debt levels. Practical implications This study provides additional evidence on the influence of military CEOs on corporate outcomes, particularly in the context of an emerging market. It underscores the positive effects of skills acquired during military service on veterans’ civilian careers, particularly in business leadership roles. The findings are valuable for managers contemplating the recruitment of veterans, highlighting the potential advantages these individuals can bring to a company. Additionally, the results may inspire younger individuals to consider military training as a means to develop valuable characteristics that can enhance their personal and professional development. Originality/value The authors have observed the notable success in firms led by CEOs with military backgrounds since Vietnam’s renovation period in the 1980s. Yet, to the best of the authors’ knowledge, research on the influence of military-experienced CEOs in Vietnam remains scarce. This study is the first pioneering in shedding light on the diverse contributions of soldiers to the development of the Vietnamese economy.

Impacts of adaptation to climate change on farmers’ food security and level of sesame production in Western Ethiopia

The existence of multiple stresses and poor adaptive capacity make Africa most susceptible to climate change. In Ethiopia the potential adverse effects of climate change on the agricultural sector, the main stay of the country’s economy, are major concerns. To ensure food security, reducing the vulnerability of agricultural systems through different feasible adaptation strategies is one of the policy options in response to climate change impact This study is a first of its kind in examining the relative effectiveness of various adaptation strategies in ensuring farmers’ food security and enhancing level of sesame production in rural area of Western Ethiopia. In addition to data obtained from meteorological stations, cross-sectional data were collected interviewing 400 farm households. Descriptive statistics, two-stage least square (2SLS) and double-hurdle (D-H) models were used to analyze the data. The results of the study indicate that households are adapting using various strategies to the looming climate change in the area. The study also indicated that, though sesame production was negatively impacted by the climate hazards, smallholders have continued its production at minimum level due mainly to its high value crop character. 2SLS estimation results revealed that rainfall and temperature variability have negative impact on household’s food security. Moreover, the result indicates effectiveness of climate adaptation strategies namely agronomic practices, irrigation and soil and water conservation in reducing climatic risks and ensuring household food security. The result also implicitly indicated that farmers continued to adapt sesame production under risk climate and it is contributing to farmers’ food security. Further, the result revealed that climate change adaptation strategies have positively impacted the level of sesame production. Consequently, policy that augments households’ climate awareness and promotes adaptation decision and strategies could help reducing risks pertaining to climate and thereby improves farmers’ food security status and production of high value export potential crop—sesame.

Impact of fiscal poverty alleviation funds on poverty mitigation and economic expansion: evidence from provincial panel data in China

PurposeSince 2013, China has implemented targeted poverty alleviation policies, successfully eradicating absolute poverty nationwide by 2021. The fiscal funds allocated for poverty alleviation have significantly contributed to reducing poverty in impoverished areas. However, to date, there has been a lack of scholarly research specifically examining the effects of these fiscal poverty alleviation funds on both poverty reduction and economic growth. This study aims to address two key questions: What role do fiscal poverty alleviation funds play in reducing poverty? Additionally, do these funds contribute to economic growth?Design/methodology/approachProvincial panel data in China from 2010 to 2020 are used to test the impact of fiscal poverty alleviation funds on poverty reduction and economic growth. The empirical study of this paper primarily employs panel data within difference and two-stage least squares (2SLS) estimation for causal identification.FindingsPoverty alleviation funds positively influence China’s economic growth and significantly reduce the rural poverty rate. During the sample period, the contribution of poverty alleviation funds to economic growth reached 7.3%, and the contribution to the reduction of the poverty incidence rate was 8.4%.Originality/valueThe key contribution of this study lies in its novel approach of using empirical methods to probe the impacts of fiscal poverty alleviation funds on provincial economic growth. Additionally, this paper also empirically tests the mechanisms by which fiscal poverty alleviation funds promote growth and reduce poverty, mainly by improving the infrastructure development conditions in impoverished areas.

Controlling shareholders’ stock pledges and greenwashing–Evidence from China

This study examines whether controlling shareholders’ stock pledges may affect greenwashing. Controlling shareholders’ stock pledges can increase the commitment of controlling shareholders and reduce their risk-taking willingness. Both the existence and the percentage of controlling shareholders’ stock pledges are negatively related to greenwashing. The findings are robust to the 2SLS estimation with IV, PSM, entropy balancing, and other tests. Moreover, the effect is stronger for long-term stock pledges, suggesting that the longer duration of stock pledges may serve as a stronger motivation for controlling shareholders to restrain misconduct, which provides important insights on how to address greenwashing amid growing environmental concerns.

Taxation and Income Inequality in ASEAN Countries

Research Originality: This study contributes to literature by investigating the impact of taxation on income inequality, with a specific focus on Southeast Asian countries.Research Objectives: To investigate the impact of taxation on income inequality in Association of Southeast Asian Nations (ASEAN) countries.Research Methods: A panel data model focusing on ASEAN from 1998 to 2021 was used, and a two-stage least squares (2SLS) estimation method, incorporating fixed effects and instrumental variables was used. Tax instrument comprised two components, namely tax ratio, reflecting volume of tax; and tax structure, representing direct, indirect, and income taxes.Empirical Results: The results showed that tax ratio, direct tax, and income tax reduced income inequality in Southeast Asia. However, the magnitude of the impact should be more significant. Prioritizing education and improving the quality of workforce could effectively reduce income inequality, as shown by Singapore's success in this area.Implications: This study had significant implications for ASEAN policymakers, as it offered valuable insights into designing and implementing taxation policies to reduce income inequality and promote economic development across the region. JEL Classification: D63, H20, H23How to Cite:Alexander, A., Gitaharie, B. Y. (2024). Taxation and Income Inequality in ASEAN Countries. Etikonomi, 23(1), 397 – 414. https://doi.org/10.15408/etk.v23i2.32352.

Economic Impacts of the 1997 Compulsory Education Reform in Turkey: New Findings and Employment Analysis

This study investigates the economic impact of Turkey's 1997 compulsory education reform, which extended mandatory schooling from five to eight years. Utilizing data from the seventh wave of the World Values Survey and employing an instrumental variable approach with Two-Stage Least Squares (2SLS) estimation, we provide new insights into the reform's outcomes. The findings reveal that the reform significantly increased educational attainment and reduced gender disparities. However, the anticipated economic benefits were limited, with higher unemployment rates and a lower likelihood of high-skilled employment among treated cohorts. Additionally, those affected by the reform reported lower perceived improvements in their standard of living compared to their parents. These results suggest that the expansion of education increased the supply of educated individuals, potentially lowering the overall value of education in the labour market.

New quality productivity and environmental innovation: The hostile moderating roles of managerial empowerment and board centralization

As new quality productivity (NQP) emerges as a rising star of productivity that can effectively leverage technological innovation and sustainability, this study aims to explore the relationship between NQP and environmental innovation, with a particular focus on the roles of managerial empowerment and board centralization within the context of China A-share listed companies. Utilizing the entire sample of China A-share market from 2013 to 2022, the study analyses the effectiveness of various dimensions reflecting innovation engagement among Chinese listed companies. For measuring NQP, the entropy method is employed to calculate the weights. By controlling for industry and year effects, the study examines both the main and moderating effects of managerial empowerment and board centralization. Additionally, heterogeneity tests, robustness checks, and two-stage least squares (2SLS) estimation were conducted to address endogeneity concerns. The results demonstrate that NQP significantly enhances environmental innovation, with managerial empowerment supporting this positive effect and board centralization obstructing it. The positive effect of NQP is particularly evident in state-owned enterprises, while in heavily polluting industries, the anticipated positive moderating effect of top managers disappears due to strict regulatory environments. Furthermore, board centralization negatively moderates environmental innovation, especially in lightly polluting sectors where internal governance is more sensitive. The study underscores the importance for policymakers to tailor regulations that balance managerial empowerment and board centralization to enhance the transformation of NQP into environmental innovation. Future research is needed to further investigate different background settings and the mechanisms through which NQP influences sustainability.

A Practical Guide to Weak Instruments

We survey the weak instrumental variables (IV) literature with the aim of giving simple advice to applied researchers. This literature focuses heavily on the problem of size inflation in two-stage least squares (2SLS) two-tailed t-tests that arises if instruments are weak. A common standard for acceptable instrument strength is a first-stage F of 10, which renders this size inflation modest. However, 2SLS suffers from other important problems that exist at much higher levels of instrument strength. In particular, 2SLS standard errors tend to be artificially small in samples where the 2SLS estimate is close to ordinary least squares (OLS). This power asymmetry means the t-test has inflated power to detect false positive effects when the OLS bias is positive. The Anderson-Rubin (AR) test avoids this problem and should be used in lieu of the t-test even with strong instruments. We illustrate the practical importance of this issue in IV papers published in the American Economic Review from 2011 to 2023. Use of the AR test often reverses t-test results. In particular, IV estimates that are close to OLS and significant according to the t-test are often insignificant according to AR. We also show that for first-stage F in the 10–20 range there is a high probability that OLS estimates will be closer to the truth than 2SLS. Hence we advocate a higher standard of instrument strength in applied work.

The Simultaneity of Strategic Financial Decisions: Evidence from PSX listed Firms

This study investigates the interrelationships among financing, dividends, and the investment choices of non-financial firms listed on PSX. Unlike previous research, which primarily focused on developed nations with well-developed financial markets and investor protection laws, this study examines businesses in a developing economy characterized by fragile corporate governance, precarious investor protection laws, and political instability. The aim of this study is to shed light on the unique decision-making processes of managers operating in such contexts. This study employs a framework of simultaneous equations considering the flow of funds identity and utilizes the 3SLS estimation technique, which addresses the limitations of single-equation estimation methods. The findings reveal significant interdependencies among corporate financing, dividends, and investment decisions. Financing decisions positively influence dividend decisions and vice versa. Similarly, financing decisions positively impact investment decisions and vice versa. Moreover, dividends and corporate investments have been shown to be competing uses of funds. The results highlight the sensitivity of all three financial decisions to internal cash flows. Additionally, leverage and internally generated cash flows are identified as alternative sources of funds, while investment and dividend decisions are constrained by both internal funds and external debt. These findings align with the flow of funds approach and provide valuable insights for corporate managers and investors to understand the dynamics of financial choices in non-financial firms. This study contributes to the literature by filling a gap in knowledge regarding the interactions among financing, dividends, and investment decisions in emerging markets.

Improving instrumental variable estimators with poststratification

Abstract Experiments studying get-out-the-vote (GOTV) efforts estimate causal effects of various mobilization efforts on voter turnout. However, there is often substantial noncompliance in these studies. A usual approach is to use an instrumental variable (IV) analysis to estimate impacts for compliers, here being those actually contacted by the investigators. Unfortunately, popular IV estimators can be unstable in studies with a small fraction of compliers. We explore poststratifying the data (e.g. taking a weighted average of IV estimates within each stratum) using variables that predict complier status (and, potentially, the outcome) to mitigate this. We present the benefits of poststratification in terms of bias, variance, and improved standard error estimates, and provide a finite-sample asymptotic variance formula. We also compare the performance of different IV approaches and discuss the advantages of our design-based poststratification approach over incorporating compliance-predictive covariates into the two-stage least squares (2SLS) estimator. In the end, we show that covariates predictive of compliance can increase precision, but only if one is willing to make a bias-variance trade-off by down-weighting or dropping strata with few compliers. By contrast, standard approaches such as 2SLS fail to use such information. We finally examine the benefits of our approach in two GOTV applications.

Exogeneity tests and weak identification in IV regressions: Asymptotic theory and point estimation

This paper provides new insights on exogeneity tests in linear IV models and their use for estimation, when identification fails or may not be strong. We make two main contributions. First, we show that Durbin-Wu-Hausman (DWH) and Revankar-Hartley (RH) exogeneity tests have correct level asymptotically, even when the first-stage coefficient matrix (which controls identification) is rank-deficient. We provide necessary and sufficient conditions under which these tests are consistent. In particular, we show that test consistency can hold even when identification fails, provided at least one component of the structural parameter vector is identifiable. Second, we study point estimation after estimator (or model) selection, when the outcome of a DWH/RH test determines whether OLS or an IV method is employed in the second-stage. For this purpose, we use (non-local) concepts of asymptotic bias, asymptotic mean squared error (AMSE), and asymptotic relative efficiency (ARE), which remain applicable even when the estimators considered do not have moments (as can happen for 2SLS) or may be inconsistent. We study the asymptotic properties of OLS, 2SLS, and pretest estimators which select OLS or 2SLS based on the outcome of a DWH/RH test. We show that: (i) OLS typically dominates 2SLS estimator asymptotically for MSE across a broad spectrum of cases, including weak identification and moderate endogeneity; (ii) exogeneity-pretest estimators exhibit consistently good performance and asymptotically dominate both OLS and 2SLS. The proposed theoretical findings are documented by Monte Carlo simulations.

FDI REFORMS AND INDUSTRIAL WAGE AFTER THE LAUNCH OF “MAKE IN INDIA”: EMPIRICAL EVIDENCE

India gradually started liberalizing its industrial, trade and foreign direct investment (FDI) related policies since the launch of economic reforms in 1991. The empirical evidence on the impact of FDI spillovers on industrial wages in India has generated mixed results so far. The current study analysed the impact of FDI inflows on the real wage rates of the workers using data from seven major industrial sectors between 2001–2002 to 2019–2020. The two-stage least squares (2SLS) estimation results suggest that FDI inflows positively influenced both the skilled and unskilled wage rates. Moreover, FDI inflows in productive sectors led to a greater rise in wages vis-à-vis the unproductive sectors. In addition, key government policy initiatives like the Make-in-India (MII) scheme and FDI reforms were found to be effectively enhancing wage rates, though the impact on skilled wage rates was greater. The paper stressed the need to create a holistic environment that can attract FDI in both upstream and downstream segments, facilitating India’s deeper participation in global value chains (GVCs) and IPNs on the one hand and realisation of associated dynamic benefits on the other.

The Relationship between Nursing Home Staffing and Health Outcomes Revisited

ObjectiveNursing homes make staffing decisions in conjunction with choosing quality goals, potentially leading to endogeneity bias between staffing and quality. We use instrumental variables (IVs) to explore it. DesignRetrospective statistical analysis of 2017–2019 Payroll-Based Journal, Minimum Data Set, Nursing Home Care Compare, and Long-Term Care Focus. Settings and ParticipantsA total of 11,261 nursing homes nationally. MethodsWe estimated separate models for each of 6 quality measures as dependent variables, and registered nurses (RNs), certified nurse assistants (CNAs), and licensed practical nurses (LPNs) as independent variables, including other control variables associated with quality. The models were estimated using both ordinary least squares (OLS) and 2-stage least squares (2SLS) methods, the latter accounting for endogeneity. The IVs were defined as the average staffing of competing nursing homes in the same market as the index facility. ResultsEstimated coefficients for the quality measures in the 2SLS models were up to 5 times larger than in the OLS models. The 2SLS estimates for antipsychotic medications use increased with higher RN staffing [0.279 (0.004 to 0.553)] and decreased with higher CNAs [−0.125 (−0.198 to −0.052)]. Hospitalizations decreased with more RNs [−1.328 (−1.673 to −0.983)] and LPN staffing [−0.483 (−0.755 to −0.211])] and increased with CNA [0.201 (0.109 to 0.293)] staffing. Emergency room visits decreased with higher RNs [−1.098 (−1.500 to −0.696)] and increased with CNAs [0.191 (0.084 to 0.298)]. Long-stay activities of daily living [−0.313 (−0.416 to −0.209)] and short-stay functioning [−0.481 (−0.598 to −0.364)] improved only with higher CNA staffing and pressure sores improved only with increased RN staffing [−0.436 (−0.836 to −0.035)]. Conclusions and ImplicationsOur findings demonstrate the importance of accounting for endogeneity in studies of staffing and quality. Endogeneity changes conclusions about significance, direction, and magnitude of the relationship between staffing and specific quality measures. These findings highlight the need to further study and understand the nuanced relationship between different staffing types and different health outcomes such as the difference between the relationship of RN and CNA hours per resident day to antipsychotic quality measures.

Do foreign direct investment and foreign aid accelerate economic growth in developing countries?

PurposeThis paper aims to study the impact of foreign direct investment (FDI) and official development assistance (ODA) on the economic growth of developing countries. This paper classifies sample countries into two groups (low- and high-income developing countries) based on income level and investigates whether the two sources of foreign capital have different effects on the economic development of each subgroup of countries.Design/methodology/approachThe authors analyze panel data on 93 countries from 1981 to 2020 using a two-stage least squares (2SLS) estimation. The 2SLS method is used to overcome the endogeneity problem between economic growth and FDI. The sources of the data are World Bank and OECD.FindingsFirst, FDI inflows tend to accelerate per capita GDP growth in both total sample countries and within both groups of countries. Second, ODA has a significant impact on per capita GDP growth only for low-income developing countries. This result indicates that ODA seems to be particularly important for low-income developing countries.Practical implicationsThis paper suggests policy implications that low-income developing countries should create an environment for more ODA funds to flow into themselves with efforts such as improving the credibility and effectiveness of the government related to ODA programs. It also provides implications for donors of ODA to focus their ODA resources on low-income developing countries to more effectively achieve the goal of helping developing countries’ economic growth.Originality/valueThis paper investigates whether FDI and ODA have different effects on the economic development of low- and high-income developing countries. To the best of authors’ knowledge, this point is not addressed in existing studies.

How does green investment respond to ICT and financial development?

Green investment has become the most effective option to support the efforts to mitigate worldwide climate change. Due to the efficacy of green investment in tackling climate change and global warming, researchers are searching for the factors that can boost green investment. Therefore, this analysis aims to investigate the efficacy of information and communications technology (ICT) and financial development in promoting green investment in the most polluted economies. The study analyzes aggregate data from the most polluted economies using the 2SLS, GMM, and instrumental variables quantile regression estimators. In addition, we also perform regional analysis by disaggregating the data into four regions: Asia, America, Africa, and Europe. The results reveal that ICT, financial development, financial institutions, and financial markets boost green investment in the most polluted economies. However, the regional analysis confirms the favorable influence of ICT on green investment in all the regions, while financial development boosts green investment in all the regions except Africa; financial institutions and financial market development promote green investment in America and Europe. Therefore, we suggest that policymakers must increase their reliance on ICT and the financial sector while designing a policy to promote green investment.

Environmental, social and governance performance and firm value: does ownership concentration matter?

PurposeThis paper has a dual purpose: to produce a clear panorama of microfactors behind the implementation of environmental, social and governance (ESG) in emergent economies, and to identify long-term versus short-term implications of ESG and its impacts on sustainable transformation. In particular, the paper investigates the moderating role of ownership concentration on ESG performance and firm value relationship in Southeast Asia during 2010–2022 and COVID-19 period 2020–2022.Design/methodology/approachBy adopting stakeholder and agency theory lenses, this study analyzes 591 nonfinancial listed companies in Southeast Asia from 2010 to 2022 with 2,673 firm-year observations. Data has been collected from Refinitiv and companies' annual reports. Ordinary least squares (OLS) and two-stage least squares (2SLS) estimators are main strategies.FindingsDuring 2010–2022, the links between ESG performances and firm value are negative. Ownership concentration negatively moderates the nexus between governance pillar and firm value in both short and long run. In COVID-19, ownership concentration also plays an antagonistic moderating role in ESG combined score-firm value association. The results show a crucial role of blockholders in Southeast Asian firms and their strong support to ESG in conquering crisis period, suggesting that managers develop balancing mechanisms in making ESG-related decisions; policymakers and regulators improve effective control instruments with strong legal systems and enhanced law enforcement to protect minority shareholders.Originality/valueThis is the first study to test the connection between ESG performance, ownership concentration and firm value in Southeast Asia that has: (1) utilized different proxies of firm value and ownership concentration in robustness tests, (2) controlled heteroskedasticity defects, (3) eliminated companies in the Banking and Finance sector from the sample to avoid distorting the conclusions and (4) empirically verified the driven role of governance pillar in ESG performance and ownership concentration reversely moderated the impact of governance pillar on firm value.

How Much Should We Trust Instrumental Variable Estimates in Political Science? Practical Advice Based on 67 Replicated Studies

Abstract Instrumental variable (IV) strategies are widely used in political science to establish causal relationships, but the identifying assumptions required by an IV design are demanding, and assessing their validity remains challenging. In this paper, we replicate 67 articles published in three top political science journals from 2010 to 2022 and identify several concerning patterns. First, researchers often overestimate the strength of their instruments due to non-i.i.d. error structures such as clustering. Second, IV estimates are often highly uncertain, and the commonly used t-test for two-stage-least-squares (2SLS) estimates frequently underestimate the uncertainties. Third, in most replicated studies, 2SLS estimates are significantly larger in magnitude than ordinary-least-squares estimates, and their absolute ratio is inversely related to the strength of the instrument in observational studies—a pattern not observed in experimental ones—suggesting potential violations of unconfoundedness or the exclusion restriction in the former. We provide a checklist and software to help researchers avoid these pitfalls and improve their practice.

Innovation and environmental protection: An EU perspective

The objective of this paper is to explore how environmental protection expenditures (EPE) affect innovation and investigate the potential causal relationship between the two variables. The novelty and main contribution of our paper to the literature stems from the fact that we look at total environmental protection expenditures from both the public and private sectors, and distinguishing between corporations and households in the private sectors. We also consider both inputs and outputs of innovation and address potential endogeneity issues in this relationship, which are both lacking in the current literature. Using a panel of EU countries over the period 2006–2020, this study generally finds a positive impact of EPE on innovation after controlling for the effects of trade, credit, education and inflation on innovation, and using the System GMM estimator to treat endogeneity. Moreover, EPE from the government sector drives the bulk of this positive impact. The core results are robust to alternative measures of innovation, alternative estimation techniques that address endogeneity (i.e., the Lewbel 2SLS, Mundlak, and Hausman-Taylor estimators) and the moderation effects of Climate Change Performance (CCPI). This study also provides a useful guide to policy makers engaged in environmental planning.

Assessing the impact of environmental performance on corporate financial performance: A firm-level study of GHG emissions in Africa

Utilizing comprehensive firm-level data from 2005 to 2021 across various African nations, our study investigates the effect of a firm's greenhouse gas (GHG) emissions on its corporate financial performance (CFP). The research yields the following findings. First, we find that GHG emission intensity exerts a significantly negative impact on CFP measured by return on assets (ROA) and return on equity (ROE). This effect is consistently substantiated across different measurements of GHG emission intensity and CFP. Second, our analysis includes a series of stringent robustness assessments, all of which affirm the stability and resilience of our primary findings. Third, following the Paris Agreement, a decrease in GHG emission intensity correlates with a further rise in ROA and ROE. Additionally, we emphasize the pivotal role of industry-specific characteristics and regional variables in shaping the connection between GHG emission intensity and CFP. Our findings underscore that the influence of GHG intensity on a firm's financial performance is particularly pronounced within high-emission sectors in contrast to their low-emission counterparts. Furthermore, we show that the impacts of GHG emission intensity on CFP are primarily driven by firms operating in Southern Africa. Fourth, to recognize potential endogeneity concerns within the GHG emission-CFP relationship, we employ a two-stage least-squares regression (2SLS) approach. This method utilizes industry-level GHG emission intensity as the principal instrumental variable (IV), and in order to further mitigate endogeneity issues, we incorporate both lagged GHG intensity and the instrument proposed by Lewbel (2012) based on heteroskedasticity as additional IVs alongside the kinky least squares method by Kiviet (2020). The results derived from our 2SLS estimates consistently corroborate the negative effect of GHG emission intensity on CFP. Finally, our empirical findings carry significant implications for both corporations and policymakers.

The Impact of Migration on Productivity: Evidence from the United Kingdom

Abstract The UK saw a sharp rise in work-related migration, particularly from the EU, in the 2000s and 2010s, with profound impacts on the labour market. We investigate the relationship between migration and productivity in Great Britain between 2002 and 2018, using an instrumental variable approach which follows the commonly used shift-share methodology. Our results, which are robust to a variety of tests, suggest that immigration has a positive and significant impact (in both the statistical sense and more broadly) on productivity, as measured by GVA per job at the Travel-to-Work-Area level. We indeed find that a 1 p.p. increase in the share of migrants is associated with a 0.84 % increase in productivity in 2SLS estimates. We discuss the implications for post-Brexit immigration policy.