Jesús Gorrín, Assistant Professor of Finance

Effects of Immigration on Investment

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This paper documents how corporate investment reacts to immigration. I use an interaction of the ex-ante cluster of migrants and a change in immigration policy in the UK to provide evidence that investment increases in anticipation of immigration flows. The time variation in immigration policy allows me to control for local economic shocks, reducing endogeneity concerns. Part of the increase in investment occurs through a transitory increase in fixed assets. The major change occurs in the extensive margin, through an increase in firm creation. The increase is larger for the knowledge and the service sector, suggesting that human capital is an important driver of the effect. The results suggest that firms react fast to an immigration-induced labor supply shock.