Welcome to the Machine: Firms' Reaction to Low-Skilled Immigration

Antonio Accetturo, Matteo Bugamelli, Andrea Roberto Lamorgese
2012 Social Science Research Network  
We assess the impact of low skilled immigration on firms' investment decisions. We first present a simple partial equilibrium investment model characterized by asymmetric information on workers' skills and central bargaining and show that firms are likely to react to the quality downgrade of their workforce due to immigration by accumulating more production capital. This result is empirically confirmed on a sample of Italian manufacturing firms over the period 1996-2007: firms' investment rates
more » ... s' investment rates in machinery increase in response to immigration from developing countries. This effect is stronger for large and less technologically advanced industries and it holds confirmed after a number of robustness checks. JEL classification: E22, J61, O33
doi:10.2139/ssrn.2012473 fatcat:xl7u3z6hhzcstc57itiao7upv4