Migrants and Refugees: Are They Holding Us Back or Pushing Us Forward?

As part of the Brookings Scholar Lecture Series, Brookings Mountain West presents a lecture titled Migrants and Refugees: Are they holding us back or pushing us forward? by Brookings Fellow in Global Economy and Development, Dany Bahar. It is often cited that human mobility is key to economic growth and productivity. Evidence also points to the economic costs and benefits of international migration for both the sending and receiving countries. This lecture explores if roads to economic growth and prosperity require restrictions to migration, or quite the contrary

Migration, Knowledge Diffusion and the Comparative Advantage of Nations

Do migrants shape the dynamic comparative advantage of their sending and receiving countries? To answer this question we study the drivers of knowledge diffusion by looking at the dynamics of the export basket of countries, with particular focus on migration. The fact that knowledge diffusion requires direct human interaction implies that the international diffusion of knowledge should follow the pattern of international migration. This is what this paper documents. Our main finding is that migration, and particularly skilled immigration, is a strong and robust driver of productive knowledge diffusion as measured by the appearance and growth of tradable goods in the migrants' receiving and sending countries. We find that a 10% increase in the stock of immigrants from countries exporters of a given product is associated with a 2% increase in the likelihood that the host country will start exporting that good "from scratch" in the following 10-year period. In terms of ability to expand the export basket of countries, a migrant with college education or above is about ten times more "effective" than an unskilled migrant. The results are robust to accounting for shifts in product-specific global demand, to excluding bilateral trade possibly generated by network effects, as well as to instrumenting for migration using a gravity model

Migration, Knowledge Diffusion and the Comparative Advantage of Nations

Do migrants shape the dynamic comparative advantage of their sending and receiving countries? To answer this question we study the drivers of knowledge diffusion by looking at the dynamics of the export basket of countries, with particular focus on migration. The fact that knowledge diffusion requires direct human interaction implies that the international diffusion of knowledge should follow the pattern of international migration. This is what this paper documents. Our main finding is that migration, and particularly skilled immigration, is a strong and robust driver of productive knowledge diffusion as measured by the appearance and growth of tradable goods in the migrants’ receiving and sending countries. We find that a 10% increase in the stock of immigrants from countries exporters of a given product is associated with a 2% increase in the likelihood that the host country will start exporting that good “from scratch” in the following 10-year period. In terms of ability to expand the export basket of countries, a migrant with college education or above is about ten times more “effective” than an unskilled migrant. The results are robust to accounting for shifts in product-specific global demand, to excluding bilateral trade possibly generated by network effects, as well as to instrumenting for migration using a gravity model

A Roadmap for Immigration Reform: Identifying Weak Links in the Labor Supply Chain

The last time the U.S. enacted major immigration reform was the Immigration Reform and Control Act in 1986. Since then, little has been done to fix what has become a broken system despite heated debate at the national, state, and local levels. Unfortunately, the immigration debate has also become increasingly disconnected from the exigencies of the U.S. economy, even in the aftermath of the COVID-19 pandemic in which worker shortages and labor market dysfunction have become increasingly glaring. Worse still, the aging U.S. workforce and structural shifts toward a more service-oriented economy will likely deepen much of this dysfunction unless policymakers can agree to major reforms to shore up the U.S. workforce.This report aims to support these necessary reforms by highlighting the areas of the economy that are most in need of workers. Importantly, our approach not only highlights occupations that are—and will continue to be—in greatest demand, but also the occupations that are most complementary to the existing workforce, ensuring that efforts to meet these labor market needs will support all workers. At the core is a framework that we call the Occupational Opportunity Network, which identifies strategic occupations that will be in high demand for the next decade; are historically immigrant intensive; and have a high degree of complementarity with other occupations. In short, we define highly complementary occupations as those that are central to the U.S. workforce in the sense that they are used as inputs to many different industries and, within those industries, tend to augment the employment of other workers

Essays on the Transmission and Diffusion of Productive Knowledge in International Economics

Numerous empirical studies have shown the difficulties associated with the transmission of knowledge and the limitations of its diffusion process. What are the implications of these difficulties and limitations to international economics? This dissertation deals with this question by looking at how productive knowledge plays a role in the evolution of the comparative advantage of nations and the international expansion of multinational corporations. The first chapter finds that a country is 65% more likely to start exporting a good that is being exported by any of its geographic neighbors, consistently with evidence on the limited geographic patterns of knowledge diffusion. The second chapter finds that migrants, serving as carriers of productive knowledge, play a role in explaining the appearances of new export industries in both their sending and receiving countries. In particular, in terms of their ability to induce exports in the average country, an increase of only 65,000 people in the stock of migrants is associated with about 15% increase in the likelihood of adding a new product to a country's export basket. The figure becomes 15,000 for skilled migrants. The third chapter looks at how the barriers to knowledge transmission within the firm limit the horizontal expansion of multinational corporations. The findings suggest that multinational corporations are, on average, about 12% less likely to horizontally expand a sector that is one standard deviation above the mean in the knowledge intensity scale

International Knowledge Diffusion and the Comparative Advantage of Nations

In this paper we document that the probability that a product is added to a country’s export basket is, on average, 65% larger if a neighboring country is a successful exporter of that same product. We interpret our result as evidence of international intra-industry knowledge diffusion. Our results are consistent with the overall consensus in the literature on technology spillovers: diffusion is stronger at shorter distances; is weaker for more knowledge-intensive products; and has become faster over time

Refugees, trade, and FDI

Humanitarian policies aimed at welcoming forced migrants may yield unexpected economic dividends. This article focuses on the trade and investment links forged by refugees between their countries of resettlement and the origins they fled. We document how such immigrant-links differ in the case of refugees, focusing on why their opportunity sets might differ and the difficulties in establishing economic connections against a backdrop of civil conflict and political unrest. We conclude by discussing a range of policies aimed at engaging refugee diasporas to foster development at refugees' origins.</p

Fool's gold: the impact of Venezuelan currency devaluations on multinational stock prices

This paper documents negative cumulative abnormal returns (CARs) to five exchange rate devaluations in Venezuela within the context of stiff exchange controls and large black-market premiums, using daily stock prices for 110 multinational corporations with Venezuelan subsidiaries. The results suggest evidence of statistically and economically significant negative CARs of up to 2.07 percent over the ten-day event window. We find consistent results using synthetic controls to causally infer the effect of each devaluation on the stock prices of global firms active in the country at the time of the event. Our results are at odds with the predictions of the efficient market hypothesis stating that predictable devaluations should not affect the stock prices of large multinational companies on the day of the event, and even less so when they happen in small countries. We interpret these results as a suggestive indication of market inefficiencies in the process of asset pricing

Migrants are key to productivity gains for countries

For decades, the focus of the economic literature when studying migration was, for the most part, on the impact it has on labour-related outcomes such as wages and unemployment. But these studies have only been able to tell us one side of the story. As is the case with other flows, such as trade and investment, there are many other aspects of migration that go beyond the localised short-term impact it might have on the labour force. However, there are many reasons to believe that migration may be a highly effective driver of knowledge diffusion across borders, write Dany Bahar (Brookings) and Hillel Rapoport (Paris School of Economics)

Losing Our Minds? New Research Directions on Skilled Migration and Development

This paper critiques the last decade of research on the effects of high-skill emigration from developing countries, and proposes six new directions for fruitful research. The study singles out a core assumption underlying much of the recent literature, calling it the Lump of Learning model of human capital and development, and describes five ways that research has come to challenge that assumption. It assesses the usefulness of the Lump of Learning model in the face of accumulating evidence. The axioms of the Lump of Learning model have shaped research priorities in this literature, but many of those axioms do not have a clear empirical basis. Future research proceeding from established facts would set different priorities, and would devote more attention to measuring the effects of migration on skilled-migrant households, rigorously estimating human capital externalities, gathering microdata beyond censuses, and carefully considering optimal policy among others. The recent literature has pursued a series of extensions to the Lump of Learning model. This study urges discarding the Lump of Learning model, pointing toward a new paradigm for research on skilled migration and development