Blog Post

Can mass migration boost innovation and productivity?

The long-term impact of migration on innovation and productivity growth in host countries is a neglected issue in the current debate on refugees. Research shows that these effects can be substantial, but if Europe wants to capitalize on this potential it will need better information systems to match migrants’ skill sets with host environments.

By: and Date: February 10, 2016 Topic: European Macroeconomics & Governance

 

As we have seen at various points in history, skilled migrants can have a substantial impact on the host economy through innovation and productivity growth, even when arriving in large numbers. These effects are beyond the direct contribution of the skilled migrants themselves.

Migrant and host skills need to be sufficiently connected.

One important channel of impact is indirect, through the transfer of knowledge from migrant workers to native workers in the host country. However, analysis shows this takes a long time to materialize, and the effects are not obvious.

Migrants’ skills need to complement those of the host economy, host economies need a strong native human capital set that is able to learn from migrant skills, and migrant and host skills need to be sufficiently connected.

The effects of skilled migration

Borjas (1994) develops a theory model to show how immigrants with high levels of productivity who adapt rapidly to the host labour market can make a significant contribution to economic growth in the host economy. This contribution is not only direct, through the higher productivity of the migrants themselves, but also indirect, by raising the productivity of the native human capital through transfer of know-how.

Borjas (1995) also explores when immigration can be beneficial for economic growth.  When immigrants’ skills are sufficiently different from native workers’ skills, and when their characteristics are complementary to the native factors of production, this can lead to an “immigration surplus”. However, Borjas’ research does not look at the impact of mass migration on host productivity growth.

The Huguenots

When the Huguenots were outlawed in France by Louis XIV in the 17th century, thousands of skilled migrants fled to other European countries. Hornung (2014) analyses the impact of this mass skilled migration on host productivity growth.

About 20,000 people went to Brandenburg-Prussia (which had a population of about 1.5 million), and about 5,000 to Berlin, where they represented about 20% of the town’s total population. The Huguenots were known for being well educated and holding skilled occupations.

The Prussian King, Friederich Wilhelm I, selected Huguenots according to their skills and assigned them to the Prussians towns depopulated by the Thirty Years’ War and the Black Death.

Hornung uses the historic records of this natural experiment where Huguenots were placed in selected Prussian towns, in combination with firm-level data on the value of inputs and outputs for all 693 textile manufactories in Prussian towns in 1802.  He finds that immigration had long-term positive effects on productivity in textile manufacturing, where the Huguenots had specific skills.

Immigration had long-term positive effects on productivity.

The effects found are sizeable: a 1 percentage point increase in the share of Huguenots in 1705 led to a 1.4 percentage point increase in productivity in textile manufacturing in 1802. Most effects were indirect, through technology transfers which increased the productivity of local textile plants.

Even if the Huguenot manufacturing plants did not survive, technology was transferred to local manufacturing plants by training workers. However, these indirect transfers took a long time to materialize, due to the gap in native textile skills in Prussia at the time and to language issues.

 

 

Mass migration from Nazi Germany

The Jewish migrants who left Germany for the United States in the 1930s and 1940s are another example of forced mass skilled migration. By 1944, over 133,000 German Jewish émigrés had found refuge in the United States. Most were urban white-collar workers and one fifth were university graduates.

Moser, Voena and Waldinger (2014) use the research fields in which dismissed German Jewish émigré chemists were specialized pre-1933, and compare changes in U.S. patenting by U.S. inventors in these research fields with changes in U.S. patenting by U.S. inventors in the fields of other German chemists.

German Jewish émigré chemists led to a 71 percent increase in local patenting.

The authors find sizeable positive effects. They estimate a 71 percent increase in local patenting. The authors also document the multiple channels through which these effects materialized:

  • The arrival of the migrants encouraged U.S. inventions by helping to attract new domestic inventors to the research fields of émigrés, rather than by increasing the productivity of incumbent U.S. inventors in these fields;
  • Co-inventors of migrants became active patentees in the fields of migrants especially after 1940, and continued patenting through the 1950s;
  • Co-inventors of co-inventors of migrants also substantially increased their inventive activity in émigré fields after 1933, and remained substantially more productive throughout the 1950s and 1960s.

Potential effects of low-skilled migration

Preliminary work by Rachel Harris suggests that mass migration may positively impact host economies’ innovation capacity, even if migrants are low-skilled. She studied the Mariel Boatlift, a mass emigration of Cubans to the USA in 1980, as a natural experiment.

Little precise information is available on how many people came to the United States during the Mariel Boatlift or exactly where they settled. The most reliable sources (Card, 1990) indicate that between April 1980 and June 1981, 120.000-126.000 Cubans entered the US labour market, about half settling in Miami, and half in the rest of Florida. Many of the migrants were low-skilled and had a low level of English.

Nevertheless, Harris finds that the Mariel Boatlift caused an increase in patents in Florida, in technological categories with low barriers to entry. She suggests that this could be because individual inventors had access to a large supply of low-skilled labourers, and were able to hire them to do housework, child care and other manual work. This allowed these inventors to substitute away from housework and spend more time inventing, leading to an increase in patenting.

Lessons for the current crisis

From these historical studies it can be seen that skilled migration can have a substantial effect on productivity growth in the host economies.  But this requires migrants’ skills to be matched to the needs of host economies.

Skilled migration can have a substantial effect on productivity growth in the host economies.

Unfortunately, reliable systematic data on the skills of the current migration wave is not widely available. One of the most up-to-date sources of information is from the Swedish Employment Services, where refugees are asked to provide information on their education as part of an ‘establishment programme’.

In 2015, most of the refugees accepted onto the programme had less than 9 years of education, as shown in the figure below. Interestingly however, the second biggest share of refugees had higher education. This bodes well for the long term impact of migrants’ skills on the host economy.

If Europe wants to capitalize on the potential for long term effects on productivity growth from its migrants, European leaders must better balance migrants’ skills and the needs of host countries.

European leaders must better balance migrants’ skills and the needs of host countries.

Currently it is not possible to match migrants to the skills base of the host regions in Europe, as systematic information on incoming skills is missing.

A better information system on the incoming migrants’ skills is needed, in order to match migrants better with the hosting environments, and ensure that their potential to boost innovation and productivity growth is not wasted.

Positive spillover effects from matched skills will also be larger and faster with smaller language barriers.  The earlier migrants can take language courses, the quicker they can integrate into the labour market and the faster spillover effects can materialize.

Implementing this information system, and matching skills and environments at the European level would benefit migrants and host countries on a  larger scale. It would reduce fixed set up costs, and allow for better matches.


Republishing and referencing

Bruegel considers itself a public good and takes no institutional standpoint. Anyone is free to republish and/or quote this post without prior consent. Please provide a full reference, clearly stating Bruegel and the relevant author as the source, and include a prominent hyperlink to the original post.

View comments
Read article Download PDF

External Publication

Export and patent specialization in low carbon technologies

The low-carbon technology sector is going through a period of disruptive innovation and strongly increased investment, which is likely to continue. Global investment in new renewable power is the largest area of electricity spending. The political momentum to combat climate change was reinforced in the Paris Agreement, when almost every country in the world agreed to aim for carbon neutrality in the second half of the century.

By: Robert Kalcik and Georg Zachmann Topic: Energy & Climate, Innovation & Competition Policy Date: August 7, 2018
Read article Download PDF More on this topic More by this author

External Publication

The impact of artificial intelligence on employment

Technological development, and in particular digitalisation, has major implications for labour markets. Assessing its impact will be crucial for developing policies that promote efficient labour markets for the benefit of workers, employers and societies as a whole.

By: Georgios Petropoulos Topic: Innovation & Competition Policy Date: July 31, 2018
Read about event More on this topic

Past Event

Past Event

Should we revisit the patent system for pharmaceutical products?

Analysis of the legal issues with the current IP system for regulated market authorisations for pharmaceutical products, as well as its economic effects.

Speakers: Arno Hartmann, Christian Jervelund, Margaret K. Kyle, Roberto Romandini, Bruno van Pottelsberghe, Amaryllis Verhoeven and Reinhilde Veugelers Topic: Innovation & Competition Policy Location: Bruegel, Rue de la Charité 33, 1210 Brussels Date: July 9, 2018
Read article More by this author

Parliamentary Testimony

European Parliament

The potential impact of Brexit on ICT policy

Testimony before the European Parliament's Committee on Industry, Research and Energy (ITRE).

By: J. Scott Marcus Topic: European Parliament, Innovation & Competition Policy, Testimonies Date: June 27, 2018
Read article More on this topic

Blog Post

Robots, ICT and EU employment

Disruptive technologies based on ICT, robots, and artificial intelligence have transformed labour markets through their important effects on employment. As the number of industrial robots continues to rise, our results imply that some measures to facilitate workforce transition and accommodate the rise of automation might be needed to maintain satisfactory labour market outcomes.

By: David Pichler, Georgios Petropoulos and Francesco Chiacchio Topic: Innovation & Competition Policy Date: June 15, 2018
Read article Download PDF

External Publication

European Parliament

EU funds for migration, asylum and integration policies

This study provides an overview, analysis and evaluation of how EU funds for migration, asylum and integration policies have been used. Using publicly available information, insights from interviews with various stakeholders and a survey of non-governmental organisations (NGOs), the authors evaluate the allocation, implementation and oversight of EU funds.

By: Francesco Chiacchio, Zsolt Darvas, Konstantinos Efstathiou, Inês Goncalves Raposo and Guntram B. Wolff Topic: European Macroeconomics & Governance, European Parliament, Testimonies Date: May 23, 2018
Read about event More on this topic

Past Event

Past Event

Solving the productivity puzzle

This event featured the presentation of new research by the McKinsey Global Institute.

Speakers: Maria Demertzis, Janet Henry, Jan Mischke, Dirk Pilat and Reinhilde Veugelers Topic: Innovation & Competition Policy Location: Bruegel, Rue de la Charité 33, 1210 Brussels Date: May 23, 2018
Read about event More on this topic

Past Event

Past Event

Protecting EU firms without protectionism

Do we need more effective support for EU companies, more targeted to threatened sectors of strategic importance to the EU? Do we need to revise our competition policy rules on state aid to allow for a more strategic industrial policy support? Do we need new policy approaches to prepare for a changing global environment?

Speakers: Vincent Aussilloux, Tomas Baert, Paolo Casini, Gert-Jan Koopman, André Sapir, Reinhilde Veugelers and Focco Vijselaar Topic: Innovation & Competition Policy Location: Bruegel, Rue de la Charité 33, 1210 Brussels Date: May 3, 2018
Read article More on this topic More by this author

Opinion

The upheaval Italy needs

While Italy remains without a new government, it would be foolish to believe that a country where anti-system parties won 55% of the popular vote will continue to behave as if nothing had happened. But political upheavals sometime provide a unique opportunity for addressing seemingly intractable problems. After its political upheaval, Italy now needs an economic one.

By: Jean Pisani-Ferry Topic: European Macroeconomics & Governance Date: April 30, 2018
Read article Download PDF More on this topic

Working Paper

The impact of industrial robots on EU employment and wages: A local labour market approach

In theory, robots can directly displace workers from performing specific tasks (displacement effect). But they can also expand labour demand through the efficiencies they bring to industrial production (productivity effect). This working paper adopts the local labour market equilibrium approach developed by Acemoglu and Restrepo to assess which effects dominate and the impact of robots on wage growth and employment rate in Europe.

By: Francesco Chiacchio, Georgios Petropoulos and David Pichler Topic: Innovation & Competition Policy Date: April 18, 2018
Read article More on this topic More by this author

Blog Post

Clouds are forming over Italy’s elections

While the prospect of a gridlock reassured investors about the short-term risk of an anti-establishment government, Italy still needs a profound economic shake-up and is in no position to afford months or years of dormant governments.

By: Alessio Terzi Topic: European Macroeconomics & Governance Date: February 28, 2018
Read article More on this topic More by this author

Opinion

Beyond border control, migrant integration policies must be revived

Border control and burden-sharing of refugees is just one aspect of immigration policies. Greater financial inclusion and the tailoring of regulations to refugees' specific needs would benefit not only the refugees themselves, but also native citizens.

By: Zsolt Darvas Topic: European Macroeconomics & Governance Date: February 23, 2018
Load more posts