Immigrant effects on country competitiveness: Evidence from OECD countries.

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Immigrant effects on country competitiveness:

Evidence from OECD countries.

University of Groningen – MSc International Financial Management Master Thesis

Student name: Addis Tesfa Bizuye Student number: s2504162 Email:addiste@gmail.com Supervisor: Dr. Halit Gonenc

Abstract

Immigrants continue to be subjects for political debates and the dissatisfaction source of natives. Anti- immigrant groups try to use economic and financial analyses to support their views although many re-searchers investigate plenty of positive immigrant effects where immigrants have positive impacts on in-ternational diversification, breaking cultural barriers between home and host markets, and contribute their positive role for international trade and international marketing strategies. This thesis examines the immi-grant effects on country competitiveness in OECD countries. I find evidence showing that immiimmi-grant ef-fects are positive on the productivity, foreign direct investment, and technology transfer of countries; these results, in turn, increase the competitiveness of countries. Employed immigrants in OECD countries sig-nificantly affect the foreign direct investments and technology transfer and also positively related to the export of countries expressed as a percentage of the gross domestic product.

Keywords: immigrants, competitiveness, productivity, FDI, investor protection, export

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1. Motivation /Introduction.

It is not difficult to know reasons that make people leave their home countries and move to other countries. Immigration has existed during the whole history of humankind. In earlier times tribes roamed in search for more fertile lands and foundation of new settlements. In modern times mi-gration still takes place in our world, people are forced to change their places of living because of different natural and man- made calamities. Migration is the process, which takes place when an individual or group leaves one country for another with the intention to settle temporarily or per-manently down in the country (Englishtopics.net, 2016). Economic, political, and social conse-quences and the lack of religious freedom and civil war are among the main reasons for migration (Geist and McManus, 2011).

Life in destitution and hopelessness frequently constrains individuals to look a superior life (Englishtopics.net, 2016). The gap between the developed countries and the third world countries increases year by year, although international organizations, like UN, EU and OECD have ap-plied different strategies to minimize the differences. People migrate to advanced countries in order to get stable earnings. They believe that, as if better employment opportunities and higher standards of living are available in these countries. Many other people move because of natural inconveniences, in this case, natural disasters have forced millions of people to leave their native country in search for security. Others change their place of living in search for political freedom; it can be a migration towards political liberty and political rights or escape from government per-secution. Dictator governments deny minority rights, as a result ethnic conflicts in some countries and religious ignorance forces people to flee to other countries as a refugees. As we see now in Syria wars also induce people to leave the countries they live in. Criminality and terrorist attacks are also reasons that make people to find alternatives in order to save their lives.

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tries are attached to strict immigration policies because of their citizens’ pressure. According to Aleksynska and Tritah (2014), the share of immigrants in the population of OECD reporting countries is increasing. It was only 5% in 1960 as we compared to the total population of OECD countries. However, it reached more than 13% in 2005. The rate of increase varies greatly across member countries. Therefore, we could conclude that immigrants became an important compo-nent of the OECD labor force. Immigrants are sharing OECD’s labor force structure and dynam-ics over a relatively long period.

On the other hand, it is not unexpected to hear public opinion on the negative impacts of immi-gration on public finance and the employment competition especially, with the low-skilled na-tives. According to Boubtane et al. ( 2016), labor migration to OECD countries is alarmingly increasing in recent decades. For example, in 2007 the share of immigrants in employment reached 12% according to OECD 2009 report. This fact increases the fear of natives on the labor market competition. However, based on the analysis of Boubtane et al. ( 2016) , many developed countries face losing large number of working force for retirement. On the contrary, younger working population, who will be expected to re-place those who retire are too few. Having seen this context, migration plays a significant positive role than to be a source of negative insight.

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national trade because increasing amounts of goods in the host country relative to the rest of the world puts a downward pressure on their price. Others, especially right wing politicians argue that as if immigrants are sources of dissatisfaction of native citizens. According to such argu-ments, immigration leads to racism, increased antagonism and other social problems. But pro-immigration people continue to challenge policy makers and anti-immigrants by asking questions like ‘what do people acquire after immigration?’ Thus, as receiving country, there are many ben-efits from immigrants. Skilled workers who are usually eager to work for salaries, cheap labor forces, product diversity, additional cultural centers and increasing of exports are few benefits from immigrants. International economists and international business scholars support these ar-guments. For example, Cerdin et al.( 2013) explore that an increasing inflow of immigrants espe-cially qualified and university-educated immigrants deserve more attention from international business practitioners and scholars. Their arguments laid on the market for highly qualified peo-ple within MNCs that are in need of international oriented high-qualified peopeo-ple. Highly qualified people prefer to migrate to a new country to advance their career and getting the opportunity what for their qualification deserve. Such migrants could be a source of competitive advantage for both international firms and organizations. The study conducted in 2004 which collected data from 30 developed countries that participate in OECD, ranging from Germany and New Zealand to the United States and France, investigated that highly skilled and educated immigrants in the workforce can provide developed countries with a sharp competitive advantage (Web.a.ebscohost.com, 2016). Furthermore, global competitiveness is a function of different factors such as international trade, foreign direct investment (FDI), and productivity of workforces and social wellbeing of the society. This thesis aims to explore additional empirical analysis on the impact of immigration on the competitive-ness of OECD countries, especially, analyzing impacts of immigrants on international trade; im-ports and exim-ports, Foreign direct investment and productivity (which are determinant factors of global competitiveness) of OECD countries .

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factors that may influence country’s trade performance so that they are subjects of international competitiveness. Various studies have suggested that FDI and International trades in the form of imports and exports have an important impact on competitiveness (Gugler and Brunner, 2007; Ghose and Kharas, 1993). FDI can indeed be a source of competitiveness but previous studies have neglected the role of location, in particular, the role of clustering on the absorptive capacity of the host state (Gugler and Brunner, 2007). While there are many theories about competitive-ness and related disciplinary fields of strategy, operations, resource- based view ( Barney, 200l), and economics, these theories are not usually used by researchers in their decisions of enhancing or sustaining competitiveness.

2. Literature review

2.1. Immigrants and immigrant effect

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thors argue that EU-born highly skilled migrants are more likely to occupy jobs under their level of education. This paper can be seen as evidence to how immigrants are facing different chal-lenges from the local job markets to international cross- cultural communication and then be suc-cessful. Stough et al. (2011) argue that many migrants appear to possess a strong potential and capacity for entrepreneurship, and they show a particular dynamism in creating enterprises. They are more likely to be self-employed than natives. The authors of this article continue their argu-ment by exploring examples, in countries like the Netherlands and US, migrant entrepreneurship has proven to be an efficient means of socio-economic integration contributing significantly to the overall economic growth and development of the area concerned.

Immigration is an inherent factor in our globalized society. Sara et al. (2015) pointed out that immigration is a prominent economic and political issue in Europe as well as in most of the de-veloped world. According to Chung (2003), an immigrant effect refers to the impact that an im-migrant employer or employee has on the success of an international marketing operation, princi-pally where that firm is engaged with immigrant’s country of origin. Chung (2004) classified existing findings on immigrant effects into three categories. The first group consists of studies examining the immigrant links to a country’s international trade and investment flows. The sec-ond group focuses on the nature of business established by immigrants and the third group focus-es on examining issufocus-es that are more specific.

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this study, migration flows tend to have a positive and significant impact on the level of GDP per capita, even in countries that have not- selective migration policies.

2.2. International Competitiveness of countries

According to world economic forum 2013-2014 report, competitiveness is defined as the set of institutions, policies, and factors that determine the level of productivity of a country. The level of productivity, in turn, sets the level of prosperity that can be reached by an economy. The productivity level also determines the rates of return obtained by investments in an economy, which in turn are the fundamental drivers of its growth rates.

2.2.1. Productivity and competitiveness

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However, for every one of the dialogs, verbal confrontation and composing on the point, there is still no influential theory to clarify national competitiveness. There is not even an acknowledged meaning of the term "competitiveness" as connected to a country. As clarified in Harvard busi-ness review, some see national competitivebusi-ness as a full-scale monetary marvel, driven by varia-bles, for example, trade rates, loan fees, and government shortfalls. In any case, in one time, na-tions like Japan, Italy, and South Korea have all delighted in quickly rising expectana-tions for eve-ryday comforts notwithstanding spending deficiencies; Germany and Switzerland in spite of ac-knowledging monetary forms; and Italy and Korea in spite of high-loan fees. (Porter, 1990) has further clarified that others contend that competitiveness is an element of modest and plentiful work. Overall, Germany, Switzerland and Sweden have all flourished even with high wages and work deficiencies. Moreover, it ought not a country look for higher wages for its laborers as an objective of productivity. In spite of the fact that there are distinctive contentions, in view of (Porter, 1990) a last prominent clarification for national competitiveness is a contrast in admin-istration works on, including adminadmin-istration work relations. The issue here, nevertheless, is that diverse commercial enterprises require distinctive ways to deal with administration. The absence of clear clarification flags a significantly key inquiry. What is a "competitive'' country in any case? Is a ''competitive ''country one where each organization or industry is competitive? No OECD member nation meets this test. Indeed, even no single nation on the planet meets this model. Every country has vast divisions of its economy that fall a long ways behind the world's best rivals. As per (Porter, 1990), the main important idea of competitiveness at the national level is efficiency. The essential objective of a country is to deliver a high and rising way of life for its residents. The ability to do as such relies on upon the productivity with which a country's work and capital are utilized

2.2.2. Investor protection and competitiveness

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ognize the firm that does not pay interests or that violates debt covenants. Shareholders get the right to vote on the key corporate matters, to select directors, to sue the directors and the firm. Investor protection is a determinant factor for foreign direct investment and technology transfer. For example, Cyrus et al. ( 2006) concluded that strong investor protection is conducive to global financial integration. The research results of these authors suggest that as nations enhance their bank and shareholder rights and remote speculators learn of these institutional changes, money related openness may well achieve the levels saw in the mid twentieth century. Strong investor protection motivates people to engage in the business sectors of a country, facilitating to the im-provement of financial markets and strengthening the global competitiveness of a country as a whole. Using the data on 40 countries for the period 1970-98, Cyrus et al. (2006) have investi-gated that the worldwide sequence of investor protection is a critical determinant of global in-vestment positions. As explained by (La Porta et al., 2000), investor protection has strong conse-quences on the ownership of firms, the development of financial markets and allocation of real resources. The findings from the research conducted by Chen et al. (2009) pointed out that in emerging markets, firm-level corporate governance and country-level shareholder protection seems to be substituted for each other in reducing the cost of equity. Thus, based on the refer-enced research papers above and global competitiveness index framework (werforum.org, 2016), one could see how investor protection could influence the global competitiveness of countries.

2.3. Immigrants, International Trade, Foreign Direct investment and Productivity

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not able do had they stayed at home. Then again (Porter, 1990) brought up that International trade and Foreign direct investment can both enhance a country's profitability (competitiveness) and undermine it. Porter augmented his investigation by focusing on how international trade and di-rect foreign investment enhance or debilitate national productivity (competitiveness).They bolster rising national productivity by permitting a country to work in those commercial enterprises and fragments of businesses where its organizations are gainful and to import where its organizations are less beneficial. No country can be focused in everything. Then again, worldwide trade and foreign direct investment additionally can debilitate productivity. They uncover a country's indus-tries to a test of worldwide gauges of productivity. An industry will miss out if its efficiency is not adequately higher than foreign opponents' to balance any favorable position in local wage rates. In the event that a country loses the capacity to contend in a scope of high productivi-ty/high-wage commercial ventures, its standard of life is debilitated another part of international trade, tourism is one of the beneficiary sectors from immigrants. The research conducted by Balli et al. (2016) has investigated that except for the African countries, the immigrants residing in OECD countries have a positive advertising effect for their home country, inducing tourism flows from OECD countries. They also find that the quality of institutions, along with freedom and civil liberty indices, are important in selecting tourism destinations. Tourism has the power to attract FDI into the country. Thus, one can conclude that the outward FDI from OECD countries to the immigrant’s home country and exports will increase. That may affect the international competi-tiveness of countries. This research aims to explore immigrant effects on the competicompeti-tiveness of OECD countries.

3. Research Design

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issues. Finance is a determinant factor for productivity, international trade and foreign direct in-vestment and technology transfer, in turn; they affect the global competitiveness of countries. Protection of investors, as a financial issue, has been investigated as a factor of competitiveness of an economy, firms and countries (Cyrus et al., 2006; La Porta et al., 2000; John et al., 2010).

Therefore, my theoretical expectations are (1) high and medium educated immigrants are posi-tively correlated with international trade, thus immigrant effects are positive on competitiveness (2) The employment status of immigrants play a positive role in productivity of the countries (3) Number of immigrants affect FDI positively (4) There will no relationship between the gender of employed immigrants and FDI and (5) the strength of Investor protection has positive impact on competitiveness of countries. From these expectations, I drive the following set of hypothesis: Hypothesis 1. There is a positive relationship between foreign direct investment and technology transfer and the number of immigrants

Hypothesis 2. There is a positive relationship between high-educated immigrants and productivity of countries, which are OECD reporting.

Hypothesis 3. There is a positive relationship between medium educated immigrants and international trade export as expressed in percentage of GDP of OECD countries.

Hypothesis 4. There is a negative relationship between low educated working forces of immigrants and the competitiveness of OECD countries.

Hypothesis 5 There is no direct relationship between the gender of employed immigrants and foreign direct investment and technology transfer to OECD countries.

Hypothesis 6. There is a positive relationship between employment of immigrants and the international trade EXP_GDP competitiveness of OECD countries.

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4. Data, measures and Methodology

4.1. Measures of Competitiveness as calculated by the OECD

OECD in its official site brought up the measures of competitiveness. Three components of petitiveness can be measured; import competitiveness, export competitiveness and overall com-petitiveness. In view of ((Martine Durand and Claude Giorno, 2014), import competitiveness is measured in the condition for assembling import volumes by the differential between the makers' business sector cost and that of their rivals, if the hypothetical model is once taken as our begin-ning point.Despite the fact that the measure of import-competitiveness is gotten by a moderately direct method, the measure of export competitiveness is fairly more perplexing. The competitive-ness term in the condition for a given nation's produced trade volumes is the differential between the nation's export cost and that of its rivals on their normal markets. On the suspicion that a na-tion's fare costs do not rely on upon the nation of destination, contenders' fare costs are controlled by a twofold weighted pat-tern.Extensively, the fundamental method of reasoning is the accom-panying: take, for instance, the U.S. market, where a sending out nation is contending with Amer-ican makers as well as with different nations trading to that business sector. The cost of the na-tion's rivals on the greater part of its business sectors is then acquired by collecting its rivals' costs on every business sector as per the example of its fares.

Finally, the OECD likewise figures pointers of overall competitiveness, which give an average measure of nation's competitiveness in their home markets and in addition in their fare markets. The detailed calculation is given in the OECD official website as referenced.

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competitiveness index, GCI, which is calculated by the world Economic Forum as a basis for its global competitiveness reports.

4.2. Measures of productivity and FDI-TRA

According to (Kuepper and Kuepper, 2016), Productivity measures how much a country produc-es for each unit of labor or capital invproduc-ested – or the value of output for each unit of input. Thproduc-ese data demonstrate how efficiently resources are utilized in order to generate economic output in order to identify tight or loose economic conditions, although there is no single measure of productivity that has widely accepted globally. On the other hand, FDI and technology transfer index is the variable that I included in my model. In their research, (Campos and Kinoshita, 2002) pointed out that FDI could guide to technological transform that is neutral to both capital and labor: FDI direct put forward the level of technology in the host economy. This is due to a variety of mechanisms. For example, one mechanism that FDI affects growth is learning. FDI diffuses knowledge about production methods, product design and new organizational and managerial techniques. In this light, imitation becomes a crucial element. FDI may also enhance the produc-tivity of domestic R&D (Research and Development) activities. I used the measures of pay and productivity scale (1-7) and FDI_TRA (1-7 scale) as used in OECD database in my model.

4.3. Strength of investor protection.

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variables should be used in the calculation of investor protection, DTF (0-100) score off countries and strength of mi-parity investor protection index (0-10) are used interchangeably. I used the strength of investor protection as it is listed in the database.

4.4. Variable definitions and Data sources

Table 1 below defines variables, describes each variable used in the model, explains how to measure the given variable and shows the data sources of each variable.

Table 1 variables, their description, measurement and data sources. Variables Description Measurement Source

GLO_COM_IN D

Global Competitiveness Index Global Competi-tiveness Index

PROD Pay and productivity, 1-7 (best) Pay and produc-tivity, 1-7 (best)

FDI_TRA FDI and technology transfer, 1-7 (best) FDI and tech-nology transfer, 1-7 (best)

IMMI_INFL Inflows of foreign population by na-tionality

Thousands OECD HIGH_EDU Employment rates for High

education-al attainment foreign born aged (25-64)

Percentage OECD

MEDI_EDU Employment rates for Medium educa-tional attainment foreign born aged (25-64)

Percentage OECD

LOW_EDU Employment rates for Low educational attainment of foreign born aged (25-64)

Percentage OECD

EMPL Employment percentage rates by place of birth (foreign-born) and educational (total) attainment (25-64)

Percentage OECD

WOMAN Employment percentage rate for for-eign born woman

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MAN Employment percentage rate for for-eign born man

Percentage OECD STRENGTH_OF

_INVESTOR_P RO

Strength of investor protection index (0-10)

Strength of investor protec-tion index (0-10)

Historical Data Sets and Trends Data of World Bank doing business data-base. http://www.doingbusiness.org/custom-query

4.5. Sample selection

For this research, I collected data from OECD’s international migration statistics official website and the global competitiveness index historical dataset and historical data of World Bank doing business database over the period from 2006 to 2013. The initial sample consists of 34 OECD countries, which were selected non- randomly. Although there are missing values in few coun-tries for few periods, that count below 10%. I attached all the data set that I used, in the appendix section.

4.6. Model specification.

To test the relationship between number of immigrants, the education level of immigrants, em-ployment status of immigrants, gender of employed immigrants, international trade exports as percentages of gross national product, foreign direct investment and technology transfer, strength of investor protection and global competitiveness index of 34 OECD countries, I used the follow-ing four regression model equations.

PRODit = α0 +β1 (No. of Imm. it) + β2 (Edu.Hit) +β3 (Edu.Mit) +β4 (Edu.Lit)

+β5 (Emp.it) + β6 (Woman it) + β7 (Man it) + β8 (STRENGTH_OF_INVESTOR_PRO it) +εit (1)

FDI_TRAit= α1+β1 (No. of Imm. it) + β2 (Edu.H it) +β3 (Edu.M it) +β4 (Edu.L) it

+β5 (Emp. it) + β6 (Woman it) + β7 (Man it) +β8 (STRENGTH_OF_INVESTOR_PRO it) +εit (2)

Int’l trade EXP_GDPit= α3 +β1 (No. of Imm. it) + β2 (Edu.Hit) +β3 (Edu.Mit) +β4 (Edu.Lit) +β5 (Emp.it)

+β6 (Womanit) +β7 (Manit) +β8 (STRENGTH_OF_INVESTOR_PROit) +εit (3)

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Using these four equations, I tested the model with an ordinary least square regression analysis in order to explore immigrant effects on country-level competitiveness in OECD. αi defines a con-stant term in each equation while βi ‘s are coefficients of the corresponding variables. Moreover, εit represents the error term in each equation. Finally, i define countries in the sample and t de-notes time.

4.7. Variables

Dependent variables: Pay and Productivity (PROD), International trade exports as percentage of gross domestic product (Int’l trade EXP_GDP), Foreign direct investment and technology trans-fer (FDI-TRA) and global competitiveness index (Glo_Com-Ind) are being used as dependent variables in each of the regression equations’ respectively. International trade was shown as in-ternational trade export and inin-ternational trade import as we measure inin-ternational trade export competitiveness and international trade import competitiveness. However, my focus on my anal-ysis is international trade export. Thus, I used the country’s export percentage to its whole GDP as my point of reference. Finally, global competitiveness is the major dependent variable and I use productivity, international trade export and foreign direct investment and technology transfer as determinants of global competitiveness based on the model proposed. I have tested immigrant effects and strength of investor protection directly to the scale of productivity and pay (1-7), In-ternational trade export as a percentage of GDP and the scale of foreign direct investment and technology transfer (1-7).

Independent variable: the independent variables are a number of immigrants (IMMI_INFL), qualities of immigrants (High, medium and low education), the gender of employed immigrants, employment status of immigrants and strength of investor protection. In addition, it includes in-ternational trade EXP_GDP, PROD, and FDI_TRA in the fourth regression equation.

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5. Results and Analysis

5.1. Descriptive statistics

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20 Table 2 descriptive statistics

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21 Figure 1

The graph in figure I show the average export percentage from GDP of the given country per year of selected 34 OECD countries and the inflow of immigrants from 2006 to 2013. Here we can see that EXP_GDP increases as the number of inflow of immigrants increase except in 2008 and 2009 .The information in this graph, which shows the relation between immigrant inflows and EXP_GDP in 2008 and 2009 may lead us to an interesting attention. Due to the financial crisis in those two years, Countries were not willing to let more immigrants enter to their country and 2009 was the critical year. Again, the number of immigrants started to increases from 2010 as the EXP_GDP of countries increases too.

The top five immigrant destinations in OECD

According to my extracted data, 44,490,272 immigrants are living in 34 OECD countries from 2006 to 2013 The United states were the first country to accept the largest number of immigrants, and thus the destination of 8,683, 472 immigrants. Germany, Spain, United Kingdom and Italy were 2nd, 3rd, 4th and 5th respectively with 5, 912, 548, 4,375,837, 3,493,702 and 3,052,215 immigrants in the same period of years. Table 3 reports the top five immigrant destinations in OECD countries. 35% 38% 40% 43% 45% 48% 50% 53% 55% 58% 60% 5,000 5,100 5,200 5,300 5,400 5,500 5,600 5,700 5,800 5,900 6,000 2006 2007 2008 2009 2010 2011 2012 2013 year E x p o r t a s a % g e o f G D P Im m igr ant s I nf lo w in T ho us and s

Average EXP_GDP vs Immigrants inflow

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22 Table 3 top five immigrant destinations

No Country 2006 2007 2008 2009 2010 2011 2012 2013 Total 1 United States 1,266,264 1,052,415 1,107,126 1,130,818 1,042,625 1,062,040 1,031,631 990,553 8,683,472 2 Germany 558,467 574,752 573,815 606,314 683,529 841,695 965,908 1,108,068 5,912,548 3 Spain 802,971 920,534 692,228 469,342 431,334 416,282 336,110 307,036 4,375,837 4 United Kingdom 451,702 455,000 456,000 430,000 459,000 453,000 383,000 406,000 3,493,702 5 Italy 254,588 515,201 496,549 406,725 424,499 354,327 321,305 279,021 3,052,215

Results of a research conducted by Aleksynska and Tritah (2014) show that there is an overall positive impact of immigration on the host countries’ income and labor productivity mostly in the medium run. According to (Center for Immigration Studies, 2016), only in the USA, there are more than 42 million immigrants living. That shows about 20.5% of these immigrants enter to the USA between 2006 and 2013. Similarly, in Germany, more than 11 million immigrants are liv-ing. In other words, over one in eight members of the Germany population is an immigrant. This proportion is even higher among the working population, where one in seven is originally from another country. Very interestingly, overall, one in five people in Germany has a migrant back-ground (Center for Immigration Studies, 2016). In fact, more than half of the immigrants crosses Germany’s border in the previous decade.

The global competitiveness index values of top five immigrant destinations.

Table 4 global competitiveness index of top five immigrant destinations

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As we can see from the data, the maximum global competitiveness index is almost 5.80 and the average value is 4.93. Table 4 shows the global competitiveness index of top five OECD coun-tries, which have the highest number of immigrants. The global competitiveness index value of the United States, which is the highest immigrant destination, is consistently high and from the top five immigrant destinations, three of them have global competitiveness index above the aver-age. Results of the regression analysis show that the inflow of immigrants has a positive relation with both pay and productivity and foreign direct investment and technology transfer. According to this result, the top five destinations of immigrants are beneficial.

5.2. Pooled results and data analysis

According to (Brooks, 2002), the simplest way to deal with data would be to estimate a single, pooled regression on all the observations together, but pooling the data assumes that there are no differences meaning the same relationship holds for all the data. Using panel data models i.e. fixed effects and random effects models; we can address a broader range of issues and tackle problems that are more complex. It is often an interest to examine how variables, or the relation-ship between them, change dynamically over time. It is usual to see researchers use panel fixed effects or random effects models. However, for the case of simplicity, by accepting its limita-tions, I use pooled regression results.

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gression equation, the variable PRO is significant at 1% and coefficients of the independent vari-ables FDI_TRA and EXP_GDP are negative.

The coefficients of HIGH_ EDU in the 2nd and 3rd equation are positive. However, its coefficient in the 1st equation is negative. To analyze the impact of high-educated immigrants on countries competitiveness and compare the results to the previous studies, care should be taken. HIGH_ EDU is significant at 10% level in the 3rd regression model and significant at 1% level in the 1st regression equation. Int’l trade EXP_GDP is not significant at any level. Nevertheless, the coeffi-cient of this variable is negative at the 4th regression equation. However, according to the results that I have obtained, EXP_GDP of countries in the OECD increases when the number of highly educated immigrants increases. This is also significant at 10% level.The total immigration inflow is positively correlated to PROD and FDI_TRA. IMMI_INFL is significant both in the 1st and 3rd equation at 1%.

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25 Table 5

This table shows the relation between proxies for dependent variables and independent variables. This table report the estimates from The dependent variables in Columns (1), (2), (3) and (4) is the extent to which competitiveness of OECD countries have influenced by the impacts of inde-pendent variables. Standard errors are in parentheses. Note: ***/**/* indicate that the coefficient estimates are significantly different from zero at the 1%/5%/10% level.

Dependent variable: (1) (2) (3) (4)

PROD FDI_TRA EXP_GDP GLO_COM_IND

C 4.027*** 4.447*** 0.789*** 3.579*** (0.200) (0.191) (0.115) (0.271) IMMI_INFL 0.000*** 0.000 -0.000*** (0.000) (0.000) (0.000) HIGH_EDU -3.115*** 0.087 0.815* (0.770) (0.735) (0.440) MEDI_EDU -5.426*** -3.140*** -1.471*** (0.988) (0.944) (0.565) LOWED -2.763*** -3.027*** -0.598** (0.483) (0.462) (0.276) EMPL -1.620 11.220*** 0.350 (2.469) (2.358) (1.412) WOMAN 7.391*** -2.349** 0.506 (1.072) (1.024) (0.613) MAN 6.249*** -2.876** 0.378 (1.305) (1.246) (0.746) STRENGTH_OF_INVESTOR_PRO 0.036 0.014 -0.044*** (0.023) (0.022) (0.013) PROD 0.336*** (0.047) FDI_TRA -0.002 (0.057) EXP_GDP -0.135 (0.085) Number of Observations 225 225 225 306 Adjusted R2 35.89% 28.52% 26.84% 16.03% F-statistic 16.68 12.17 11.27 20.41

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collinearity. Multicollinearity increases the standard errors of the coefficients. Increased standard error, in turn, makes that the coefficients for some independent variables may be found not to be significantly different from zero. However, in my data analysis, the standard errors are relatively low. Generally, variables with high correlation coefficients here are very few.

Table 6. Correlation between selected variables

Variables _{MI_INFL}IM- HIGH_ED_U EMPL _MANWO- STRENGTH_OF_I_{NVESTOR_PRO} PROD FDI_TRA EXP_GDP

IMMI_INFL 1.0000 HIGH_EDU -0.1252 1.0000 EMPL -0.0647 0.9392 1.0000 WOMAN -0.1284 0.8971 0.9563 1.0000 STRENGTH_OF_INVESTOR _PRO 0.1974 0.0250 0.0199 0.0289 1.0000 PROD 0.0927 0.0178 0.0173 0.0962 0.1273 1.0000 FDI_TRA -0.1248 0.1907 0.1045 0.1001 0.1909 0.3780 1.0000 EXP_GDP -0.4108 0.0945 -0.0022 0.0327 -0.2538 0.0673 0.4377 1.0000

6. Discussion and research implications.

As shown in the results section, the regression analysis has identified six significant variables in equation 1, five significant variables in equation five significant variables in equation 3 and one significant variable in equation these results suggest that Hypothesis Hypothesis 4, Hypothesis 5 and Hypothesis 6 are supported and Hypothesis 7 is partially supported. The other two hypothe-ses are not confirmed. Discussion of each of the proposed hypothesis is explained below. At the end of each discussion, I provide the implications of the research.

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direct investment and technology transfer. Therefore, the results for this hypothesis may lead oth-er researchoth-ers for furthoth-er investigations to draw conclusions on immigrant effects on country’s FDI_TRA.

Hypothesis 2: High educated employed immigrants vs Pay and productivity. This hypothesis is not supported. Although Hypothesis 2 is not directly supported, it brings me to an interesting in-sight. As we can see IMMI_INF is both significant at 1% and has a positive coefficient in equa-tion But HIGH_EDU has a negative coefficient. This relaequa-tion may suggest that the employment status of high-educated immigrants may be relatively unemployment or they may work below their capacity, which made them unproductive. This result has a great implication for the future research.

Hypothesis 3: Medium educated employed immigrants vs Export as a percentage of GDP. This hypothesis is not supported. As a part of international trade, it should be necessary to include the import side of international trading so that we could analyze the effect of immigrants on overall aspect of international trade net. Unfortunately, I cannot confirm my statement with results of the regression equation. This implies the issue is more open for the future research.

Hypothesis 4: Low educated employed immigrants vs Competitiveness of countries. This is not supported. It is not difficult to think that low educated employed immigrants will negatively cor-relate with the countries competitiveness .But as we can see the general correlations between var-iables attached in the appendix; low employed immigrants are positively correlated with the competitiveness of OECD countries. This would imply an interesting issue for the future re-searchers.

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Hypothesis 6: Employed immigrants vs International trade export. This hypothesis is supported. Employment has positive relation with both EXP_GDP and FDI_TRA.The two dependent varia-bles increase, as employed immigrants increase. This result is consistent with previous research-es.

Hypothesis 7: Strength of investor protection vs Productivity, foreign direct investment and in-ternational trade export. This hypothesis is partially supported. The strength of investor protec-tion is positively related to Pay, productivity, and foreign direct and technology transfer .But it is negatively related to EXP_GDP. Thus, it is partially supported.

7. Conclusion, limitations and future Research

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this paper may have influenced the results that are expected. The time-consuming nature of ana-lyzing data and unavailability of all OECD countries data in the same issue limits me to minimize my samples to only 34 countries. This is one limitation of this research. In addition, the mixture of qualitative and quantitative measurements in determining the results was another limitation. To the best of my knowledge, it is difficult to find empirical analysis on the effects of immigrants on the financial and economic status of countries, especially in international finance journals. This is another limitation of developing theories. This study will lead scholars to further research on the immigrant effects on international financial management.

8. Recommendation to Governments

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Acknowledgments

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