How do states manage the selection of immigrants? Insights from Canada

What is it about?

This paper examines the selection of immigrants in Canadian provinces since the inception of a program designed to let provinces nominate immigrants based on specific skills. The Canadian case has a long history of immigration, and is particularly helpful to inform policy research in other countries that recently experienced larger waves of immigration. The findings suggest that policy-makers tend to prioritise immigrants who help sustain the existing mix of industries in the recipient province. At face value, this decision process makes sense: policy-makers choose immigrants who are a good fit for the needs of regional businesses. The overlooked consequence, however, is that immigration may contribute to the growth of innovation in regions that are already technologically advanced, but will have the opposite effect in regions where the economy relies more heavily on traditional industries. Put another way, immigration ends up as a policy instrument that reinforces the status quo. The paper highlights a theoretical explanation for this phenomenon, arguing that politicians have electoral incentives to resist change and prevent the disappearance of traditional sectors associated with a region. Not addressing the needs of ailing sectors has a political cost. Testing the argument in this paper requires taking into consideration the fact that the two principal variables - the skill composition of immigrants and the mix of industries - influence each other. The empirical analysis uses instrumental variables to deal with endogeneity and to isolate the effect of regional industries on the selection of immigrants.

Featured Image

Why is it important?

Does immigration accelerate or slow down the growth of high-technology sectors? This is an overlooked question in the literature on immigration, yet a critical one since economic growth ultimately depends on technological innovation. When states alter the composition of their workforce through immigration, the selection process they use will inevitably have an impact on the development of specific sectors of economic activity. There is surprisingly little research on this question, which is essential to evaluate the consequences of these policy decisions for economic development.