Birthplace diversity and economic complexity: Cross-country evidence

• Published in: Research policy 2022-10, Vol.51 (8), p.103991, Article 103991
• Main Authors: Bahar, Dany, Rapoport, Hillel, Turati, Riccardo
• Format: Article
• Language: English
• Subjects: Birthplace diversity; Economic complexity; Economics and Finance; Growth; Humanities and Social Sciences; Immigration
• ISSN: 0048-7333; 1873-7625
• DOI: 10.1016/j.respol.2020.103991

•Countries with high birthplace-diverse populations become more economically complex.•Result driven by skilled migration diversity and countries in medium complexity levels.•Findings consistent with migrant diversity increasing skill-complementarities.•We address endogeneity by instrumenting diversity through predicted stocks.•Results suggest diversity boosts complexity by increasing the export diversification. We empirically investigate the relationship between a country’s economic complexity and the diversity in the birthplaces of its immigrants. Our cross-country analysis suggests that countries with higher birthplace diversity by one standard deviation are more economically complex by 0.1 to 0.18 standard deviations above the mean. This holds particularly for diversity among highly educated migrants and for countries at intermediate levels of economic complexity. We address endogeneity concerns by instrumenting diversity through predicted stocks from a pseudo-gravity model as well as from a standard shift-share approach. Finally, we provide evidence suggesting that birthplace diversity boosts economic complexity by increasing the diversification of the host country’s export basket.