Description

We study the effect of migration on firms' capital deepening, leveraging a massive influx of immigrant workers with varying skill sets from Venezuela and Haiti in Chile between 2015 and 2019. Using a theoretical framework that allows for differential productivity between native and immigrant workers, we estimate how firm capital responds to increases in the supply of skilled and unskilled workers. Identification relies on the shift-share instrument to estimate firms' exposure to immigration shocks. We use unique employer-employee data to match worker characteristics, including country of origin and education level, to balance sheet data from firms' tax returns, providing highly detailed information about the labor composition and capital in the firm that is not available in other contexts. Our findings show that a 1 p.p. increase in the proportion of skilled immigrants relative to total skilled workers in the firm raises firms' capital per worker by 1 to 2%. The impact of skilled labor on capital deepening is nonlinear and declines as firms' immigrant concentration increases, consistent with our model's predictions. This nonlinear relationship is driven by the imperfect substitutability between immigrants and native workers within the same skill group.