DP16325 Reduced R&D Investments: A Flip Side of Immigration?
This paper investigates the impact of a large immigration shock on firms' R&D investments. We examine the impact of the sudden influx of immigration to Norway after the Eastern enlargement of the European Union, and the extent to which the increased immigration penetration contributed to the observed overall decline in R&D in the business sector. To identify the effect of immigration we exploit the fact that firms differ in their occupational mix and that the exposure to increased immigration varies across occupations. In our empirical approach we exploit that language requirements are significant barriers for foreign workers, and that these requirements vary across occupations. The results suggest that the immigration shock had a negative impact on firms' R&D investments with potential long term effects on productivity growth.
