International Trade, Immigration and Human Capital: A Bayesian Efficiency Analysis of the 50 U.S. States

Abstract

Abstract We study the growth effects of two cross-border activities, flow of goods and flows of labor on U.S. state-level productivity. Using a Bayesian approach we estimate a stochastic frontier model to measure the efficiency externalities of state-level exports and immigration to each of the 50 U.S. states. Our results show that state productivity is affected negatively by state exports and immigration. However, when state exports and immigration interact together it raises state efficiency and are complements at the regional level. Incorporating human capital into the model shows that both interactions of immigrants with accumulated human capital at the state level as well as human capital embodied in immigrants entering each state improves state efficiency