Immigrants, Firms and Productivity: Evidence from Italy

The recent positive immigration trend, that has characterized Europe over the last three decades, has generated an ongoing debate on the role played by immigrants on many aspects of the labour markets. We fill a gap in the literature by offering the first evidence for Italy, on the relationship between immigration from extra EU and labour productivity. We take advantage of a rich and unique firm level data from the Rilevazione Imprese e Lavoro (RIL) conducted by Inapp in 2007, 2010 and 2015 on a representative sample of Italian firms. We start by employing standard OLS pooled regression accounting for workforce and firm characteristics and finally, we deal with endogenity issues by estimating instrumental variable regressions. Our results are consistent across all specifications and reveal the presence of a negative and causal relationship between the share of immigrants and labour productivity. However, results needs to be considered in light of some important remarks. The Italian economy is first characterized by the presence of mainly low skilled immigration and second, by a stagnant and below the EU average, level of productivity since the beginning of the early 2000s. Furthermore, some robustness analysis reveals that results are mainly driven by small-medium firms operating in the manufacturing sector.