Immigration and firm productivity: evidence from the Canadian Employer-Employee Dynamics Database
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Immigration and firm productivity: evidence from the Canadian Employer-Employee Dynamics Database Wulong Gu1 Feng Hou ●
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Garnett Picot2
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© Springer Science+Business Media, LLC, part of Springer Nature 2020
Abstract Previous studies on the impact of immigration on productivity in developed countries remain inconclusive, and most analyses are abstracted from firms where production actually takes place. This study examines the empirical relationship between immigration and firm-level productivity in Canada. It uses the Canadian Employer-Employee Dynamics Database that tracks firms over time and matches firms with their employees. The study finds that there is a positive association between changes in the share of immigrants in a firm and changes in firm productivity. This positive effect of immigration on firm productivity is small, but it is stronger over a longer period. The effect tends to be larger for low-skilled immigrants as compared with highly-skilled workers, as firm productivity growth is more strongly associated with changes in the share of recent immigrants (relative to established immigrants), and immigrants who intended to work in non-high skilled occupations (relative to immigrants who intended to work in high-skilled occupations). Those differences are more pronounced in technology-intensive and knowledge-based industries. Immigration is found to have little estimated effects on capital intensity in a firm. Finally, this study finds that high skill and lower skill immigrants have similar effects on average worker earnings arising from the positive productivity effect of immigration, but only skilled immigrants are associated with higher firm profits. Keywords Firm Employer-employee matched data Immigration Productivity ●
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1 Introduction The effect of immigration on the receiving country’s economy is an issue of intense policy and academic discussions. Previous US and European studies find that the impacts of immigration on Gross Domestic Product (GDP) per capita, the fiscal balance, and the wages of native-born workers, are generally small, either positive or negative (Borjas 2003; Card 2005; Ottaviano and Peri 2012). A few Canadian studies have also touched on this issue, and the results are mixed (Aydemir and Borjas 2007; Fung et al. 2017; Picot and Hou 2016; Tu 2010). Most previous studies in this area commonly treat immigrants as a shift in labour supply in labour markets, where the labour markets are
* Feng Hou [email protected] 1
Statistics Canada, Ottawa, ON, Canada
2
Immigration, Refugees and Citizenship Canada, Ottawa, ON, Canada
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often defined as local areas, the combination of local areas and industrial sectors, or the combination of worker’s education and experience profiles in a national labour market (Kerr et al. 2015). While each of these approaches faces specific methodological challenges (e.g., Dustmann and Preston 2012), a common limitation is that these analyses are abstracted from firms where production actually takes place and employment decision is
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