Do Foreign Experts Increase the Productivity of Domestic Firms?

While most countries welcome (and some even subsidise) high-skilled immigrants, there is very limited evidence of their importance for domestic firms. To guide our empirical analysis, we first set up a simple theoretical model to show how foreign experts may impact on the productivity and wages of domestic firms. Using matched worker-firm data from Denmark and a difference-in-differences matching approach, we then find that firms that hire foreign experts - defined as employees eligible for reduced taxation under the Danish "Tax scheme for foreign researchers and key employees" both become more productive (pay higher wages) and increase their exports of goods and services.