A Firm-Level Perspective on Migration

Abstract

A production-theory approach to migration is adopted in this paper to address the role of migrant workers from extra-EU countries in Italian manufacturing production at the firm-level. The use of flexible functional forms to model firm-level technology lets us directly derive different measures of elasticity from the coefficients of the estimated production and cost functions. Cross price and demand elasticities confirm the complementarity found in previous studies between migrants and natives. However, the two labour inputs prove to be substitute in terms of Morishima elasticity of substitution. The use of foreign labour is shown to affect also the industry composition. We find that, ceteris paribus, had migrant labour not grown in our sample period, the weight of Low Skill intensive sectors would have been approximately 2% lower and the white to blue collars ratio would have been slightly higher than observed, even accounting for the complementarity between natives and migrants.

Keywords: migrant workers, manufacturing production technology, elasticity

JEL Classification: F22, D22, J61, L60