William W. Olney and Dario Pozzoli ()
Dario Pozzoli: Department of Economics, Copenhagen Business School, Postal: Copenhagen Business School, Department of Economics, Porcelaenshaven 16 A. 1. floor, DK-2000 Frederiksberg, Denmark
Abstract: This paper studies the relationship between immigration and oﬀshoring by examining whether an inﬂux of foreign workers reduces the need for ﬁrms to relocate jobs abroad. We exploit a Danish quasi-natural experiment in which immigrants were randomly allocated to municipalities using a refugee dispersal policy and we use the Danish employer-employee matched data set covering the universe of workers and ﬁrms over the period 1995-2011. Our ﬁndings show that an exogenous inﬂux of immigrants into a municipality reduces ﬁrm-level oﬀshoring at both the extensive and intensive margins. The fact that immigration and oﬀshoring are substitutes has important policy implications, since restrictions on one may encourage the other. While the multilateral relationship is negative, a subsequent bilateral analysis shows that immigrants have connections in their country of origin that increase the likelihood that ﬁrms oﬀshore to that particular foreign country.
50 pages, April 12, 2018
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