Immigration and the economic performance of countries

Abstract

This paper provides cross‐country evidence on the relationship between immigration‐induced diversity and economic performance, as evaluated by the Economic Fitness metric. To address endogeneity concerns, we use gravity‐based predictors of migrant diversity as a source of exogenous variation. Using data for 129 countries over the period 1990–2000, we show that migration induces a sizable positive effect on the counties' Fitness. Interestingly, we provide evidence that the spillovers from diversity are mainly felt by middle‐income countries. Our findings are robust to the use of data from alternative sources, estimation methods, and an extensive set of contemporaneous and historical controls. Importantly, we also establish the validity of the results using time‐varying, gravity instruments and conventional panel data regressions.