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Immigration and Worker-Firm Matching

Author

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  • Gianluca Orefice
  • Giovanni Peri
Abstract
The process of matching between firms and workers is an important mechanism in determining the distribution of wages. In a labor market characterised by large dispersion of workers' productivity and worker-firm complementarity, high quality firms have strong incentives to screen for the quality of workers. This process will increase the positive quality association of firm-worker matches known as positive assortative matching (PAM). Immigration in a local labor market, by increasing the variance of workers abilities, may drive stronger PAM between firms and workers. Using French matched employer-employee (DADS) data over the period 1995-2005 we document that positive supply-driven changes of immigrant workers in a district increased the strength of PAM. We then show that this association is consistent with causality, is quantitatively significant, and is associated with higher average productivity and firm profits, but also with higher wage dispersion. We also show that the increased degree of positive assortative matching is mainly reached by high-productive firms "losing" lower quality workers and "attracting" higher quality workers.

Suggested Citation

  • Gianluca Orefice & Giovanni Peri, 2020. "Immigration and Worker-Firm Matching," Working Papers 2020-04, CEPII research center.
    • Handle: RePEc:cii:cepidt:2020-04
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    Cited by:

    1. Parag Mahajan, 2021. "Immigration and Local Business Dynamics: Evidence from U.S. Firms," Working Papers 21-18, Center for Economic Studies, U.S. Census Bureau.
    2. Exadaktylos, Dimitrios & Riccaboni, Massimo & Rungi, Armando, 2024. "Talents from abroad. Foreign managers and productivity in the United Kingdom," International Economics, Elsevier, vol. 177(C).
    3. Dostie, Benoit & Li, Jiang & Card, David & Parent, Daniel, 2023. "Employer policies and the immigrant–native earnings gap," Journal of Econometrics, Elsevier, vol. 233(2), pages 544-567.
    4. Nover, Justus, 2023. "Local labor markets as a taxable location factor? Evidence from a shock to foreign labor supply," ZEW Discussion Papers 23-012, ZEW - Leibniz Centre for European Economic Research.
    5. Dimitrios Exadactylos & Massimo Riccaboni & Armando Rungi, 2019. "Talents from Abroad. Foreign Managers and Productivity in the United Kingdom," Working Papers 01/2019, IMT School for Advanced Studies Lucca, revised Dec 2019.
    6. Chiara Lacava, 2023. "Matching and sorting across regions," Journal of Economic Geography, Oxford University Press, vol. 23(4), pages 801-822.
    7. Damiano Pregaldini & Uschi Backes-Gellner, 2021. "How Middle-Skilled Workers Adjust to Immigration: The Role of Occupational Skill Specificity," Economics of Education Working Paper Series 0193, University of Zurich, Department of Business Administration (IBW).
    8. Amuedo Dorantes, Catalina & Arenas-Arroyo, Esther & Mahajan, Parag & Schmidpeter, Bernhard, 2023. "Low-wage jobs, foreign-born workers, and firm performance," Ruhr Economic Papers 1040, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    9. Agostina Brinatti & Nicolas Morales, 2021. "Firm Heterogeneity and the Impact of Immigration: Evidence from German Establishments," Working Paper 21-16, Federal Reserve Bank of Richmond.
    10. Pulido, José & Varón, Alejandra, 2024. "Misallocation of the immigrant workforce: Aggregate productivity effects for the host country," Economic Modelling, Elsevier, vol. 130(C).
    11. Cole, Matthew A. & Jabbour, Liza & Ozgen, Ceren & Yumoto, Hiromi, 2024. "Refugees' Economic Integration and Firms," IZA Discussion Papers 16828, Institute of Labor Economics (IZA).

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    More about this item

    Keywords

    Matching; Workers; Firms; Immigration; Productivity;
    All these keywords.

    JEL classification:

    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • J20 - Labor and Demographic Economics - - Demand and Supply of Labor - - - General
    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers

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