International migration, particularly of skilled people, is an important influence on the diffusion of knowledge across national borders, promoting export diversification in both receiving and sending countries. Policies that provide incentives for temporary migration may therefore be a highly efficient way for firms and countries to access new knowledge and thereby to boost productivity growth.
These are the conclusions of research by Dany Bahar and Hillel Rapoport, published in the July 2018 issue of the Economic Journal. Their study finds that migrants from countries that are competitive in exporting a particular product raise the likelihood that the countries to which they move will become competitive exporters of that product too. Migrants also explain the appearance of new goods in the export basket of the sending country.
The researchers note that economic migration has become an increasingly hotly debated issue in recent years, particularly highlighted in 2016 by the US presidential election and the UK’s referendum on EU membership. There seems to be growing sentiment that immigrants add pressure to existing infrastructure and leave fewer jobs for the locals. But these fears are often not based in evidence and overlook the gains to host economies.
The new study analyses data on international migration and trade between over 100 countries during the period from 1990 to 2010. The main finding is that a 10% increase in the immigrant stock from country exporters of a certain good can explain a 2% rise in the probability of the receiving country exporting this same good to the rest of the world during the following decade, competitively and from scratch.
Qualitatively similar results are obtained for sending countries: migrants also explain the appearance of new goods in the export basket of the sending country.
The researchers find that this process is strongly driven by immigrants that are considered skilled – that is, they have completed enough years of education to earn at least a college degree. In fact, when comparing the ability of migrants to shape the export basket of countries through sector-specific shifts, the study finds that a skilled immigrant is about 10 times more effective than an unskilled one.
The evidence also shows that this effect is driven mostly by instances where the receiving country is a non-OECD one. In these cases, skilled immigrants are about 20 times more effective in driving the effect on export baskets than unskilled immigrants.
What is the reasoning behind the idea that migrants are linked to productivity shifts? The answer lies in the fact that they carry knowledge from one place to another.
Some knowledge can be embedded in goods and shipped overseas – a calculator, for example – or written down on a website or a piece of paper – a patent, for example. But there is a particular kind of knowledge that for the most part resides in people’s brains after years of experience and could be crucial for productivity – for example, how to be a good manager.
This type of knowledge – often referred to as ‘tacit knowledge’ – requires direct human interaction to be transferred appropriately. Thus, there are many reasons to believe that migration may actually be a highly effective driver of knowledge diffusion across borders. This, if anything, is the most important conclusion of the study.
In fact, this research carries important policy implications: since know-how and technology are the most important determinants of productivity growth, policies that provide incentives for temporary migration may be a highly efficient way for firms and countries to access new knowledge.
‘Migration, Knowledge Diffusion and the Comparative Advantage of Nations’ by Dany Bahar and Hillel Rapoport is published in the July 2018 issue of the Economic Journal.