Skilled immigration and firm-level upgrading as exports boosters in a developing country

We examine firm-level upgrading in Colombian manufacturing firms as a result of a high-skilled labor supply shock triggered by the Venezuelan exodus. Using a unique and confidential dataset from 2013 to 2019 and a shift-share instrumental variables approach, we find that the increased supply of skilled workers primarily drove high-skill hires, especially in R&D divisions. This skill-upgrading process boosted investments in R&D activities. Improved access to higher-quality inputs led to better production and organizational processes, product enhancements, and an increased likelihood of obtaining quality certifications, which serve as a straightforward objective measure of firm-level upgrading. Collectively, these changes were crucial for firms to increase their exports at both the extensive and intensive margins. This effect was driven by a rise in differentiated product exports, allowing firms to enter new and more sophisticated markets, particularly in high- and upper-middle-income countries.