Low-technology industries and the skill composition of immigration

This paper examines the relationship between the industry mix and policy decisions regarding the skill composition of immigration. I start with the premise that low- and high-technology industries are unequally affected by changes in the intensity of factors of production, and develop conflicting preferences over immigration policies. To avoid the negative reactions that would ensue from the depletion of regional industries, governments have incentives to adjust the skill composition of immigration in order to maintain the existing regional industry mix. I test the implications of this argument using data on Canadian provinces between 2001 and 2010, and a research design based on the two-stage least squares methodology. Overall, the empirical results are consistent with the theory: provinces relying intensively upon low-technology industries are likely to receive higher proportions of low-skilled immigrants. A consequence is that immigration policies may sustain existing technological gaps between regions and temper down the growth of high-technology sectors.