Is immigration good for natives of the recipient country? This is a tough question to answer, particularly once we think about the short versus long run. Large-scale immigration might have bad short-run effects simply because more L plus fixed K means lower average incomes in essentially any economic specification, but even given that fact, immigrants bring with them tacit knowledge of techniques, ideas, and plans which might be relatively uncommon in the recipient country. Indeed, world history is filled with wise leaders who imported foreigners, occasionally by force, in order to access their knowledge. As that knowledge spreads among the domestic population, productivity increases and immigrants are in the long-run a net positive for native incomes.
How substantial can those long-run benefits be? History provides a nice experiment, described by Erik Hornung in a just-published paper. The Huguenots, French protestants, were largely expelled from France after the Edict of Nantes was revoked by the Sun King, Louis XIV. The Huguenots were generally in the skilled trades, and their expulsion to the UK, the Netherlands and modern Germany (primarily) led to a great deal of tacit technology transfer. And, no surprise, in the late 17th century, there was very little knowledge transfer aside from face-to-face contact.
In particular, Frederick William, Grand Elector of Brandenburg, offered his estates as refuge for the fleeing Huguenots. Much of his land had been depopulated in the plagues that followed the Thirty Years’ War. The centralized textile production facilities sponsored by nobles and run by Huguenots soon after the Huguenots arrived tended to fail quickly – there simply wasn’t enough demand in a place as poor as Prussia. Nonetheless, a contemporary mentions 46 professions brought to Prussia by the Huguenots, as well as new techniques in silk production, dyeing fabrics and cotton printing. When the initial factories failed, knowledge among the apprentices hired and purchased capital remained. Technology transfer to natives became more common as later generations integrated more tightly with natives, moving out of Huguenot settlements and intermarrying.
What’s particularly interesting with this history is that the quantitative importance of such technology transfer can be measured. In 1802, incredibly, the Prussians had a census of manufactories, or factories producing stock for a wide region, including capital and worker input data. Also, all immigrants were required to register yearly, and include their profession, in 18th century censuses. Further, Huguenots did not simply move to places with existing textile industries where their skills were most needed; indeed, they tended to be placed by the Prussians in areas which had suffered large population losses following the Thirty Years’ War. These population losses were highly localized (and don’t worry, before using population loss as an IV, Hornung makes sure that population loss from plague is not simply tracing out existing transportation highways). Using input data to estimate a Cobb-Douglas textile production function, an additional percentage point of the population with Huguenot origins in 1700 is associated with a 1.5 percentage point increase in textile productivity in 1800. This result is robust in the IV regression using wartime population loss to proxy for the percentage of Huguenot immigrants, as well as many other robustness checks. 1.5% is huge given the slow rate of growth in this era.
An interesting historical case. It is not obvious to me how relevant this estimation to modern immigration debates; clearly it must depend on the extent to which knowledge can be written down or communicated at distance. I would posit that the strong complementarity of factors of production (including VC funding, etc.) are much more important that tacit knowledge spread in modern agglomeration economies of scale, but that is surely a very difficult claim to investigate empirically using modern data.
2011 Working Paper (IDEAS version). Final paper published in the January 2014 AER.
A Fine Theorem 
I don’t think this is terribly relevant to modern immigration debates at all. Technology can today be transmitted purely as information far more effectively, and to the extent hands-on acquisition of know-how is needed this need not involve permanent settlement of foreign experts.
Indeed, technically foreign experts don’t need to move to your country at all–one can simply send bright students to foreign countries to learn from the foreign experts and then return home.
It’s also clearly a very different case from modern immigration. The numbers involved, both in absolute and relative terms, are far higher today for most of the industrialized countries. Few of the immigrants today have any particular technical skills or knowledge which does not already exist in the industrialized countries. After all, China and India still sends students to the West, not the other way around. And don’t even get me started on the dim regions of the world like the Middle East, Africa, and Latin America which have more or less nothing to offer the rest of the world in terms of knowledge or skills.
Reblogged this on Paul Hünermund and commented:
Initially I wanted to write about this interesting paper as well. One part of my family descends from Huguenot immigrants to Königsberg/Prussia. So it also has a very personal notion to me. but then found out that Kevin Bryan already has a post about it to which I have not much to add.