Welcome to the machine: firms' reaction to low-skilled immigration

Antonio Accetturo, Matteo Bugamelli and Andrea Lamorgese

No 846, Temi di discussione (Economic working papers) from Bank of Italy, Economic Research and International Relations Area

Abstract: We assess the impact of low-skilled immigration on capital intensity. We first present a model characterized by frictions in the labor market and firms' asymmetric information on workers' skills and show that firms can react to the immigration-induced reduction of their workforce's skill level by increasing the capital-labor ratio. We test the predictions of the model on a sample of Italian manufacturing firms over the period 1996-2007, finding that increased immigration of low-skilled workers from developing countries, measured at the provincial level and instrumented with pre-existing enclaves of immigrants and network effects, raises capital intensity. In line with the predictions of the theoretical model, the impact of immigration, which is quite robust across empirical specifications, is stronger for larger firms and in skill-intensive sectors.

Keywords: capital intensity; low-skilled migration; firm heterogeneity (search for similar items in EconPapers)
JEL-codes: E22 J61 O33 (search for similar items in EconPapers)
Date: 2012-01
New Economics Papers: this item is included in nep-lab and nep-mig
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)

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Persistent link: https://EconPapers.repec.org/RePEc:bdi:wptemi:td_846_12

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