Migration Flows and Local Systems of Production: New Comparative Evidence on Italy and Spain
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University of Trento Graduate School of Social Sciences Doctoral Programme in Local Development and Global Dynamics Major in Innovation and Local Development Migration flows and local systems of production: New comparative evidence on Italy and Spain Doctoral Thesis Presented to the Doctoral School in fulfillment of the requirements for the Doctoral Degree Author: Anna D’Ambrosio Supervisor: Prof. Sandro Montresor Co-supervisor: Prof. Mario Davide Parrilli April 2015 Acknowledgements Many people have contributed to the development of this thesis. I thank my supervisor, Sandro Montresor, for guiding me throughout this process and for stimulating the constant improvement of this work. The accuracy and poignancy of his comments have taught me much about research. I am grateful to my co-supervisor, Mario Davide Parrilli, for his insightful advice throughout the thesis and in particular on the case studies. The first part of the thesis has benefited from my participation in the Summer School on “Gravity Models in International Trade” held by Keith Head and Thierry Mayer in Gargnano in September 2013. Their advice as well as the exchanges with the other participants have represented a turning point in the research. I am grateful to Francesco Quatraro and Giovanni Pegoretti for carefully reading an earlier draft of this thesis and for providing valuable comments to it. I am also indebted to An- tonio Vezzani, Christopher Gilbert, Stefano Schiavo, Ermanno Tortia, Gabriella Berloffa, Udo Brixy, Damiaan Percyn, Alberto Marzucchi and Roberto Gabriele for their sugges- tions on different econometric issues raised by the thesis. Giuseppe Folloni has provided useful suggestions on the interpretation of the results. I thank the researchers of the In- stituto Vasco de Competitividad, and in particular Mikel Navarro, Jon Mikel Zabala and Eduardo Sisti for their comments on the interpretation of the peculiarities of the Basque case study. The staffof the ISTAT offices in Turin and in Bologna, and particularly Roberto Carnevale and Silvestro Cocchia, have allowed me analyzing the Italian trade data. Alessandro Ar- righetti and Andrea Lasagni have provided advice on the Reggio Emilia case and enabled access to MET database, but their contribution to this research is much broader. Matteo Rinaldini has introduced me to the issue of immigration in Reggio Emilia. I gratefully acknowledge the support by Luis Sanzo in providing access and statistical exploitation of the CMT database. I am indebted to the interviewees for their kind availability in contributing to the qualitative side of this research. I duly acknowledge the financial support by the University of Trento. This thesis has also benefited much from the exchanges with my PhD fellows, Carla, Esubalew, Gashaw, Hattachan, Julianna, and Nimol. Needless to say, all remaining limitations of this work are my sole responsibility. Without Tommaso, it would simply not have been possible. 1 Contents 1 Introduction 6 I Part I: Migration and trade flows in local production systems 18 2 Migrants’ effects on trade: Methodological issues 19 2.1 Introduction.................................... 19 2.2 TheGravityModel ............................... 22 2.3 The mechanism: immigrants’ contribution to trade . 27 2.4 The unit of observation: provinces as local production systems . 30 2.5 Extant empirical literature . 34 2.6 Open econometric issues in the estimation of gravity models . 37 2.6.1 Zero trade flows . 37 2.6.2 Heteroskedasticity and functional form of the errors . 38 2.6.3 Reverse Causality . 40 2.6.4 Omitted variables and heterogeneity . 41 2.7 Proposed econometric strategy . 42 3 Migration and trade in the Spanish provinces 46 3.1 Introduction.................................... 46 3.2 Empirical background and methodology . 48 3.2.1 Empirical works on the migration-trade link in Spain . 48 3.2.2 Model and hypotheses . 50 3.3 Data ....................................... 53 3.4 Results . 58 3.4.1 Immigrants’ and emigrants’ effects on trade . 58 3.4.2 Tests on the underlying distribution of the errors . 60 3.4.3 Sub-national heterogeneity in the multilateral resistance terms . 65 3.4.4 Testing of the Hypotheses . 66 2 CONTENTS 3.5 Conclusions . 74 4 Migration and trade flows in the Italian provinces 79 4.1 Introduction.................................... 79 4.2 Background and methodology . 82 4.2.1 The Model . 82 4.2.2 Empirical studies on the migration-trade link in Italy . 86 4.3 Data........................................ 89 4.4 Proposed Econometric Strategy . 93 4.5 Results . 97 4.5.1 Subnational variation in the multilateral resistance term . 100 4.5.2 The effect of the duration of trade partnerships . 103 4.5.3 Province-level immigration shares . 105 4.5.4 Country and region-specific elasticities . 106 4.5.5 The effect of technological intensity . 107 4.5.6 Product differentiation . 110 4.6 Discussion and Conclusions . 112 II Part II: Migration flows and the reorganization of local production systems 116 5 Immigration in LPS: background and methodology 117 5.1 Introduction . 117 5.2 Immigration in industrial districts: theoretical framework . 120 5.3 Methodology: the rationale for case study analysis . 132 5.3.1 Logic model . 134 5.4 Choice of the case studies . 138 5.5 Data collection: micro-data and interviews . 139 5.5.1 Quantitative analysis . 139 5.5.2 Qualitative analysis . 141 6 The case study of Reggio Emilia (Emilia Romagna) 143 6.1 Immigration in Emilia Romagna and in the local system of Reggio Emilia: setting the framework for the case study . 143 6.1.1 The mechanic sector in Emilia Romagna and Reggio Emilia . 143 6.1.2 Local institutions and the promotion of immigrants’ integration . 145 6.1.3 Immigration dynamics in the industrial district of Reggio Emilia . 146 6.2 Reggio Emilia within the firm immigration patterns of the region: The char- acteristics of firms hiring immigrants . 148 6.2.1 Basic data . 148 3 CONTENTS 6.2.2 Cluster Analysis . 150 6.2.3 Discriminant Analysis . 152 6.3 Immigration in the local system of Reggio Emilia: Evidence from the interviews158 6.3.1 Immigrants in knowledge-oriented firms . 158 6.3.2 Immigrants in production-oriented firms . 163 6.3.3 Homogeneity vs. heterogeneity in immigrants’ social capital . 167 6.3.4 Embeddedness and the gains from immigration . 170 6.4 Synthesis ..................................... 171 7 The case study of Elgoibar (Basque Country) 176 7.1 Immigration in the Basque Country and in the local system of Elgoibar: setting the framework for the case study . 176 7.1.1 Mechanic sector and clusters in the Basque country . 176 7.1.2 The machine-tools cluster of Elgoibar . 180 7.1.3 Immigration in the local system of Elgoibar . 182 7.2 Elgoibar in the context of the Basque Country: characteristics of firms hiring immigrants . 186 7.2.1 Cluster analysis . 187 7.2.2 Discriminant analysis . 189 7.3 Immigration in the local system of Elgoibar: Evidence from the interviews . 193 7.3.1 Immigrants in knowledge-oriented firms . 193 7.3.2 The qualifications of immigrants and their replacement of local labour force.................................... 197 7.3.3 Homogeneity vs. heterogeneity in immigrants’ social capital . 200 7.3.4 Embeddedness and the gains from immigration . 201 7.4 Synthesis ..................................... 204 8 Case studies: comparative insights 207 9 Conclusions 215 Bibliography 224 A Appendix to Chapter 3 241 B Appendix to Part 2 248 B.1 Interview structure . 248 B.1.1 Enterprise Profile . 248 B.1.2 Profile of the workers within the firm . 249 B.1.3 Foreign workers . 249 B.1.4 Internationalization . 250 B.1.5 Effects of immigration at the district level . 250 4 CONTENTS B.2 Interviews . 251 B.3 Correlations . 252 B.4 Variables . 255 5 Chapter 1 Introduction In the literature on Marshallian industrial districts1, cooperation, trust and social capital are seen to reduce transaction costs within networks of firms, to facilitate information flows and to sustain competitiveness (Piore and Sabel, 1984; Becattini, 1990; Becattini and Rullani, 1993; Trigilia, 2001). Among the challenges that globalization poses to these local production systems2, an aspect that has received less attention in the literature is international migration. Yet, the work opportunities in more labour-intensive local systems have been found to attract sizable immigration flows (Murat and Paba, 2005; Barberis, 2008; Psimmenos and Georgoulas, 2001; Narotzky, 2006; Cach´onRodriguez, 2005). A side effect of immigration is the increased heterogeneity in human and social capital (Mistri, 2001; Parrilli, 2012), which is likely to challenge the local system’s reliance on mutual knowledge and trust in sustaining Marshallian agglomeration economies (cfr. Asheim, 1996, p.381). 1Basic references include Brusco (1982); Piore and Sabel (1984); Becattini (1990). According to (Be- cattini, 1990), industrial districts are a “socio-economic notion” characterized by a community of firms embedded in a community of people. Their production system is based on networks of small and medium- sized enterprises that specialize in different production phases of a core industry. The vertical dis-integration of production allows for flexibility to changing market conditions but also for economies of scale and scope that are external to the firm but internal to the district. Geographical proximity among firms allows for repeated interactions and for the arising of trust; the interaction between the social, institutional and eco- nomic sphere allows contextualised, and often tacit, knowledge to dynamically integrate with codified and technical knowledge. 2A range of studies have addressed the different challenges that globalization poses to the reproduction of the competitive advantages of Marshallian industrial districts. For instance, their innovation capacity based on incremental improvements is found to be limited compared with what would be required by global competition (Asheim, 1996); Marshallian specialization advantages (Beaudry and Schiffauerova, 2009) are eroded by the incentives to integrate in global value chains (Gereffiet al., 2005; Bathelt et al., 2004; Amin and Thrift, 1992), to delocalize production (UNCTAD, 2004) and to vertically integrate production within lead firms (Harrison, 1994a,b).