1. [ 1 ] MIGRATION AND PRODUCTIVITY. LESSONS FROM THE UK-SPAIN EXPERIENCES This project is funded by the European Commission, Research Directorate General as part of the 6th Framework Programme, Priority 8, “Policy Support and Anticipating Scientific and Technological Needs” M. KANGASNIEMI (NIESR) M.MAS (IVIE & U. VALENCIA) K. ROBINSON (NIESR) L. SERRANO (IVIE & U. VALENCIA) Brussels, March 16th 2007

2. [ 2 ] Objectives To analyze the impact of migration on productivity growth, Comparing two complementary experiences: Spain: with a very recent presence of migrants UK: traditional recipient of migration flows * From three perspectives: Impact on GDP per capita. Alternative Scenarios Growth Accounting Econometric estimates * The UK data on migrants are based on the Labour Force Survey micro data, access was provided by the UK Data Archive whose assistance is gratefully acknowledged.

3. [ 3 ] MIGRATION AND PRODUCTIVITY BASIC FACTS

4. [ 4 ] MIGRATION AND PRODUCTIVITY. BASIC FACTS Graph 1. Percentage of migrants in total employment. Spain & UK

5. [ 5 ] MIGRATION AND PRODUCTIVITY. BASIC FACTS

6. [ 6 ] MIGRATION AND PRODUCTIVITY. BASIC FACTS

7. [ 7 ] MIGRATION AND PRODUCTIVITY. BASIC FACTS

8. [ 8 ] MIGRATION AND PRODUCTIVITY. BASIC FACTS

9. [ 9 ] MIGRATION AND PRODUCTIVITY GDP PER CAPITA DECOMPOSITION: ALTERNATIVE SCENARIOS

10. [ 10 ] GDP PER CAPITA DECOMPOSITION Equation (1) Y = Real GDP N = Total Population WAP = Working Age Population AP = Active Population L = Employement

11. [ 11 ] GDP PER CAPITA DECOMPOSITION

12. [ 12 ] GDP PER CAPITA DECOMPOSITION SPAIN, THREE SCENARIOS ACCORDING TO DEMOGRAPHY (INCLUDING LABOR MARKET) VARIABLES : 1. ACTUAL 2. VIRTUAL I: NO MIGRANTS (Substitute in (1) all the demography variables by the ones corresponding to Spanish nationals) 3. VIRTUAL II: UKneization (Substitute in (1) all the demography variables by the ones corresponding to UK aggregate (migrant+nationals) population)

13. [ 13 ] SCENARIOS 1 & 2. ACTUAL AND VIRTUAL I (NO MIGRANTS)

14. [ 14 ] SCENARIOS 1 & 3. ACTUAL AND VIRTUAL II (UKneization)

15. [ 15 ] GDP pc (demography induced) UNDER 3 SCENARIOS

16. [ 16 ] MIGRANTS AND PRODUCTIVITY GROWTH ACCOUNTING

17. [ 17 ] GROWTH ACCOUNTING

18. [ 18 ] GROWTH ACCOUNTING

19. [ 19 ] GROWTH ACCOUNTING

20. [ 20 ] GROWTH ACCOUNTING: SECTORAL DISAGGREGATION

21. [ 21 ] Sectoral Disaggregation

22. [ 22 ] Sectoral Disaggregation

23. [ 23 ] GROWTH ACCOUNTING. SECTORAL DISAGGREGATION

24. [ 24 ] GROWTH ACCOUNTING. SECTORAL DISAGGREGATION

25. [ 25 ] GROWTH ACCOUNTING. SECTORAL DISAGGREGATION

26. [ 26 ] GROWTH ACCOUNTING. SECTORAL DISAGGREGATION

27. [ 27 ] Preliminary econometric analysis

28. [ 28 ] Preliminary econometric analysis Standard Cobb-Douglas production fct First difference and fixed effects estimations with year dummies (no levels available for all variables) Different specifications for migrant/native labour input: 1) number of hours (share*total hours), 2) quality adjusted by the overall labour quality 3) quality adjusted by separate indices for migrants and non- migrants (for UK only) 4) migrant share as a separate regressor in standard prod fct Data on migrant shares by industry and characteristics available for UK 1993 onwards and Spain 2000 onwards Estimations for all observations and three industry groups (1) non- services, (2) retail, transport and communication and (3) other services Separately: regressions of tfp growth on changes in migrant share and migrant labour input

29. [ 29 ] Some results Migrant share alone generally not significant as an explanatory variable in production function but migrants as a separate input are usually significant Migrants may be a selected group but using a separate quality adjustment for them makes minimal difference for coefficient estimates: but panel is short and differences between industries don’t count Are migrants more productive than natives in the UK and less productive than natives in Spain? There are considerable differences between industries: how to control this without splitting the sample? Changes in migrant share do not explain contemporaneous tfp growth

30. [ 30 ] Results

31. [ 31 ] Extensions to the econometric work Using levels rather than indices to capture variation across industries Better control of heterogeneity across industries and dynamic error structures Experimenting with different ways of taking into account the characteristics of migrants/non-migrants: different skill indices, ethnic diversity, “old” vs. “new” migrants Testing for interaction effects: are migrants complements or substitutes for capital and skilled/unskilled native labour Studying endogeneity of migrant share: do industries with declining or improving productivity hire migrants, is production technology adopted related to migrant share?

32. [ 32 ] Conclusions The characteristics of the migrant population, as well as its evolution over time and sectoral distribution are different between the two countries. GDP per capita growth has been driven by productivity growth in UK while for Spain the engine of growth has been demography. In both countries total migrant contribution to GDP growth has been positive, while the effect on labor productivity has been negative. In both countries, migrants quantity effect has been positive on output growth and negative on labor productivity. In Spain, migrants quality effect has been negative, both on output growth and on labor productivity, while for the UK it has been positive.

33. [ 33 ] Total migrants contribution to output growth is higher in Spain than in the UK with the exception of Transport & Storage & Communication and Finance & Insurance On the contrary, total migrant contribution to productivity growth is negative in almost all sectors and always higher in Spain than in the UK. Preliminary econometric results seem to support the suggestion that in the UK migrants are more productive than natives and in Spain vice versa. More work is needed to refine the econometric estimates.