Foreign Human Capital and Total Factor Productivity: A Sectoral Approach

We analyze the role of migrants in productivity growth in the three largest European countries—France, Germany and the United Kingdom—in the years 1994–2007, using Total Factor Productivity. Unlike previous research, which mainly employs a regional approach, our analysis is at the sectoral level: this allows to distinguish the real contribution of migrants to productivity from possible inter‐sectoral complementarities, which might also foster growth. We control for the share of migrants and the different components of human‐capital, such as education, age and diversity, and adopt instrumental variables strategies to address the possible endogeneity of migration. The results show that migrants contribute to the productivity of the sectors in which they are employed, but with important differences: highly‐educated migrants show a larger positive effect in high‐tech sectors, and to a lesser extent in services sector. The diversity of countries of origin contributes to productivity growth only in the services sectors.