Does Birthplace Diversity Affect Economic Complexity? Cross-country Evidence
CID Research Fellow and Graduate Student Working Paper No. 125
Dany Bahar, Hilel Rapoport, Riccardo Turati
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.
Keywords: economic complexity, birthplace diversity, immigration, growth
JEL Classification: F22, O31, O33
Affiliated Research Program: Growth Lab