Immigrants, occupations and firm export performance

• Author: Clément Nedoncelle,Léa Marchal
• Published date: 01 November 2019
• DOI: http://doi.org/10.1111/roie.12432
• Date: 01 November 2019

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Rev Int Econ. 2019;27:1480–1509.

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INTRODUCTION

This paper investigates whether French manufacturing firms employing immigrant workers exhibit

higher export performance. We revisit two strands of literature. On the one hand, empirical evidence

shows that the export‐enhancing effect of immigrants is related to the information they convey on

foreign countries (Andrews, Schank, & Upward, 2017; Hatzigeorgiou & Lodefalk, 2016; Parrotta,

Pozzoli, & Sala, 2016; Hiller, 2013; Peri & Requena‐Silvente, 2010). Existing firm‐level studies show

that immigrants possess valuable knowledge on foreign markets that decreases variable and fixed costs

Received: 27 February 2018

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Revised: 25 June 2019

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Accepted: 10 July 2019

DOI: 10.1111/roie.12432

ORIGINAL ARTICLE

Immigrants, occupations and firm export

performance

LéaMarchal1,2

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ClémentNedoncelle3

1Bielefeld University, Bielefeld, Germany

2Kiel Institute for the World Economy

& Kiel Centre for Globalization, Kiel,

Germany

3Economie Publique, INRA,

AgroParisTech,Université Paris‐Saclay

78850, Thiverval‐Grignon, France

Correspondence

Léa Marchal, Department of Economics,

Bielefeld University Universitätsstr. 25,

33615 Bielefeld, Germany.

Email: lea.marchal@uni-bielefeld.de

Funding information

This work is part of the TRAMCEF

project financially supported by a public

grant overseen by the Direction Générale

des Étrangers en France, a public grant

overseen by the French national research

agency (ANR‐10‐EQPX‐17‐CASD) and a

public grant jointly overseen by the French

and the German national research agencies

(ANR‐17‐FRAL‐0011).

Abstract

This paper investigates the export‐enhancing effect of im-

migrant workers and how this effect varies across occupa-

tions. We use a dataset made of French manufacturing firms

from 1997 to 2009 and address the problem of endogenous

employment choice using an instrumental variable‐two‐

stage least squares (IV‐2SLS) strategy and a doubly robust

estimator. Our results show that immigrants in both low‐

and high‐skilled occupations foster exports at both the in-

tensive and the extensive margins. In addition, we show that

this effect is spread across all export destinations.

JEL CLASSIFICATION

F14; F22; F16

[The copyright line for this article was changed on 17 December 2019 after original online publication.]

This is an open access article under the terms of the Creative Commons Attribution NonCommercial License, which permits use, distribution

and reproduction in any medium, provided the original work is properly cited and is not used for commercial purposes.

© 2019 The Authors. Review of International Economics published by John Wiley & Sons Ltd

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MARCHAL And nEdOnCELLE

faced by exporters. Consequently, they foster exports at both extensive and intensive margins, espe-

cially toward their origin countries. This pro‐trade effect is found to be larger for high‐skilled than for

low‐skilled immigrants, which is in line with the idea that high‐skilled individuals are more likely to

possess and gainfully apply information that is relevant to exporters. On the other hand, Mitaritonna,

Orefice, and Peri (2017) suggest that the complementarity between natives and immigrants can lead to

task reallocation and to more efficient technological choices. Hence, immigration increases the total

factor productivity of firms and, in turn, increase exports at both margins. In contrast with previous

evidence, this export‐enhancing effect of immigrants channelled through productivity should not be

restricted to high‐skilled immigrants and should not be destination‐specific.

In this paper, we revisit the two aforementioned results of the literature. First, we investigate to

what extent the effect holds across immigrants’ occupations. Second, we test whether the effect is des-

tination‐specific or not. If a productivity channel is at play, as suggested by Mitaritonna etal. (2017),

the export‐enhancing effect of immigrants should be neither occupation‐ nor destination‐specific.

To do so, we combine three datasets on French manufacturing firms from 1997 to 2009. We iden-

tify immigrant workers in a comprehensive dataset containing information on French employees, that

we combine with trade data at the firm–destination–product level and balance‐sheet data at the firm

level.1

Our sample is made of 803,603 observations.

Our estimation strategy allows us to address one main endogeneity concern related to a reverse cau-

sality bias: immigrant employment could be driven by the firm’s export performance. We implement an

instrumental variable‐two‐stage least squares (IV‐2SLS) strategy in which we instrument the number of

immigrant workers in the firm by the imputed stock of immigrants in the region of the firm based on the

1990 census. We find that both the intensive and the extensive margins positively react to the employ-

ment of immigrant workers. A 1% increase in the (instrumented) number of immigrant workers induces

a 0.42% increase in the firm’s subsequent exports. In addition, we combine our IV strategy with a doubly

robust estimator to assess the impact of immigrant employment by occupation groups. We find that the

effect is positive and significant for immigrants in both low‐ and high‐skilled occupations.

In line with existing studies, we argue that the pro‐trade effect of immigrants in low‐skilled oc-

cupations cannot be rationalized by the informational channel that is generally emphasized for high‐

skilled immigrants, as these workers are less likely to occupy decision‐making jobs or to be in a

position to transfer operative information about foreign markets to their employer. It could nonetheless

be explained by a productivity‐enhancing effect of immigrants put forward by the literature on com-

plementarity in tasks (Peri & Sparber, 2009) and in the spirit of Mitaritonna etal. (2017).

We provide a short theoretical model of heterogeneous firms to rationalize the export‐enhancing

effect of immigrant workers. We allow immigrant workers to impact firm‐level exports through two

different channels documented in the literature so far: (a) immigrant workers in high‐skilled occupa-

tions convey valuable information on foreign markets which lowers trade costs and (b) all immigrant

workers have a positive impact on total factor productivity through their complementarity with na-

tives. The export‐enhancing effect of immigrants that takes place through productivity is compatible

with immigrants in both low‐ and high‐skilled occupations. This model predicts that immigrant work-

ers foster exports to any destination. To test this prediction, we exploit variations in exports across

destinations to provide empirical evidence for the existence of a multi‐destination effect of immigrant

workers. In line with the theory, our results show that immigrants in both low‐ and high‐skilled occu-

pations reduce the concentration of exports across destinations.

The contribution of this paper is twofold. First, we put forward that immigrants in both low‐ and

high‐skilled occupations enhance exports at both intensive and extensive margins. We rationalize this

result with a theoretical model of heterogeneous firms in which we describe a simple relationship be-

tween immigrant workers, productivity, and exports. Available theoretical models have so far focused