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Immigration, trade and productivity in services:evidence from UK firms

Ottaviano, Gianmarco I. P., Peri, Giovanni and Wright, Greg C. (2015) Immigration, trade and productivity in services:evidence from UK firms. CEP Discussion Papers (CEPDP1353). Centre for Economic Performance, London School of Economics and Political Science, London, UK.

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Abstract

This paper explores the impact of immigrants on the imports, exports and productivity of serviceproducing firms in the U.K. Immigrants may substitute for imported intermediate inputs (offshore production) and they may impact the productivity of the firm as well as its export behavior. The first effect can be understood as the re-assignment of offshore productive tasks to immigrant workers. The second can be seen as a productivity or cost cutting effect due to immigration, and the third as the effect of immigrants on specific bilateral trade costs. We test the predictions of our model using differences in immigrant inflows across U.K. labor markets, instrumented with an enclave-based instrument that distinguishes between aggregate and bilateral immigration, as well as immigrant diversity. We find that immigrants increase overall productivity in service-producing firms, revealing a cost cutting impact on these firms. Immigrants also reduce the extent of country-specific offshoring, consistent with a reallocation of tasks and, finally, they increase country-specific exports, implying an important role in reducing communication and trade costs for services.

Item Type: Monograph (Discussion Paper)
Official URL: http://cep.lse.ac.uk/_new/publications/series.asp?...
Additional Information: ©2015 The Authors
Divisions: Economics
Centre for Economic Performance
Subjects: H Social Sciences > HB Economic Theory
H Social Sciences > HD Industries. Land use. Labor
J Political Science > JV Colonies and colonization. Emigration and immigration. International migration
JEL classification: F - International Economics > F1 - Trade > F10 - General
F - International Economics > F1 - Trade > F16 - Trade and Labor Market Interactions
F - International Economics > F2 - International Factor Movements and International Business > F22 - International Migration
F - International Economics > F2 - International Factor Movements and International Business > F23 - Multinational Firms; International Business
Sets: Departments > Economics
Research centres and groups > Centre for Economic Performance (CEP)
Date Deposited: 30 Jun 2015 15:51
Last Modified: 17 Aug 2019 23:26
Funders: Economic and Social Research Council
URI: http://eprints.lse.ac.uk/id/eprint/62583

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