Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/71613
Authors: 
Ortega, Francesc
Peri, Giovanni
Year of Publication: 
2013
Series/Report no.: 
Discussion Paper Series, Forschungsinstitut zur Zukunft der Arbeit 7325
Abstract: 
This paper explores the relationship between openness to trade, immigration, and income per person across countries. To address endogeneity concerns we extend the instrumental-variables strategy introduced by Frankel and Romer (1999). We build predictors of openness to immigration and to trade for each country by using information on bilateral geographical and cultural distance (while controlling for country size). Since geography may affect income through other channels, we also control for climate, disease environment, natural resources, and colonial origins. Most importantly, we also account for the roles of institutions and early development. Our instrumental-variables estimates provide evidence of a robust, positive effect of openness to immigration on long-run income per capita. In contrast, we are unable to establish an effect of trade openness on income. We also show that the effect of migration operates through an increase in total factor productivity, which appears to reflect increased diversity in productive skills and, to some extent, a higher rate of innovation.
Subjects: 
international migration
trade
income per person
productivity
geography
institutions
diversity
JEL: 
F22
E25
J61
Document Type: 
Working Paper

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