During the age of mass migration (1850-1914), an unprecedented flow of Europeans migrated to the fertile plains in Argentina, and the skills they brought played a key role in the onset of industrialisation and the country’s long-run economic development.
According to new research by Federico Droller, published in the September 2018 issue of the Economic Journal, counties where European immigration accounted for a larger share of the total population in 1914 achieved a higher per capita GDP in 1994. Europeans owned most of the industrial establishments in the fertile plains known as the pampas, and provided the majority of the industrial labour force.
The positive long-term effect of immigrants on economic development can be linked to the way Europeans changed the human capital profile of the population: their literacy and skills were crucial to the onset of industrialisation. Europeans arrived with higher literacy rates than the native population, and helped to raise overall literacy rates.
The new study also finds a differential effect between high- and low-skilled immigrants. A one percentage point increase in the share of high-skilled Europeans in a county increased per capita industrial GDP by 26%, whereas a same increase in the share of low-skilled workers raised industrial GDP by only 1.3%.
The research uses the pampas of Argentina as an empirical setting. These fertile plains represent an excellent setting for several reasons:
• First, the area experienced a significant inflow of migrants relative to the local population over a short period of time – from 1869 to 1914.
• Second, and more importantly, counties across the fertile plains share common national institutions and homogeneous geographical endowments. This makes it possible not only to assess the effect of change in the composition of the population, but also to rule out alternative explanations.
Importantly, immigrants were over-represented both in the ownership of industrial establishments and in the industrial workforce; the share of high-skilled Europeans in 1914 explains a significant part of industrial development, both in the short and long run. Analysis broken down by the nationality of the migrants reveals the higher contribution of northern Europeans compared with southern Europeans.
This study contributes to the growing body of research on the long-run determinants of growth and on the effects of migration. In particular, the results show the importance of human capital for the process of economic development and the persistence of this effect in the long run.
Importantly, the study does not argue that human capital is the only channel through which migrants affect long-term development. Rather, in this setting, differences in human capital are key, as they combined profitably with industrial development. At a time when immigration is at the forefront of policy concerns, this research provides evidence of the positive long-term impact of large-scale immigration.
‘Migration, Population Composition, and Long Run Economic Development: Evidence from Settlements in the Pampas’ by Federico Droller is published in the September 2018 issue of the Economic Journal.