Immigration, factor endowments and the productive structure of Spanish regions

Participation of immigrants in Spanish labour market increased from less than 3 percent in 1996 to more than 13 percent in 2005. We use the factor proportion model of production to examine the impact of such a large labour supply shock on the industrial structure of Spanish regions. The results confirm that, first, labour endowment differences across regions help to explain the pattern of industry specialisation across regions. Second, immigrants and natives act as complementary factors in most industries. Third, the importance of immigration is relatively small compared to production technique changes and idiosyncratic industry changes in explaining the overall changes in industrial structure from 1996 to 2005.