Mercedes Teruel Carrizosa and Agustí Segarra Blasco

Immigration and Firm Performance: a city-level approach

This article analyses the effect of immigration flows on the growth and efficiency of manufacturing firms in Spanish cities. While most studies were focusing on the effect immigrants have on labour markets at an aggregate level, here, we argue that the impact of immigration on firm performance should not only be considered in terms of the labour market, but also in terms of how city´s amenities can affect the performance of firms. Implementing a panel data methodology, we show that the immigrants´ increasing pressure has a positive effect on labour productivity and wages and a negative effect on the job evolution of these manufacturing firms. In addition, both small and new firms are more sensitive to the pressures of immigrant inflow, while foreign market oriented firms report higher productivity levels and a less marked impact of immigration than their counterparts. We also present a set of instruments to control for endogeneity. It allows us to confirm the effect of local immigration flows on the performance of manufacturing firms.