Immigrants and Firms Productivity Essay Example

Paper Type:  Essay
Pages:  3
Wordcount:  591 Words
Date:  2022-12-20

Evidence from the Metropolitan area

The goal of the firms is to sustain productivity and make a profit. Firms user workers both skilled and unskilled and immigrants from a pool of workers. Immigrants are either employed as expatriates which is costly to the firms as compared to the employed of the local works. However, the firm cans also see immigrants cut costs especially when the documented workers are involved since the firm will is aimed at minimizing costs and maximize profits. The furs can either employ documented or undocumented immigrants. Immigrants can drive the firm's productivity. Total factor productivity theory or then multifaction productivity theory is founded on the argument that a firm's total output is a function of labor inputs, human capital, and physical labor. An increase in total-factor productivity (A), capital input (K), labor input (L), would lead to an increase in the total firm's output.

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Marginal Rate of Technical Substitution (MRTS)

In microeconomic theory, the Marginal Rate of Technical Substitution (MRTS) refers to the amount of input that must be reduced because of additional input used to maintain the output volume. The first goals in determining the marginal rate of technical substitution are to find the marginal product of labor (MPL) and the marginal products of capital (MPK). These refer to the change in the output because of employing an additional unit of capital or labor both MPK and MPL are features of the production function that is determined by the amount of labor or the amount of physical capital that the firm already have (Mitaritonna, Orefice & Peri, 2017). The MRTS, therefore, becomes the slope of the isoquant multiplied by -1. The h in the equation can be solved by making the h the subjects of the equation. The h is the productivity of labor. So, the productivity of the immigrants and productivity of the natives becomes hi, and hr. after making productivity of the immigrant and the productivity of the natives the subjects of the formula, then resulting equation becomes the marginal rate of technical substitution for immigrant's productivity with the native's productivity. The firm is aiming to reduce the cost of production, they must select the cheapest between the immigrant wages and the native's wages (wi and wn) then find the elasticity of the substitution.


Firms in the competitive market have perfect information about the costs of production and production capacity. As such, those firms focus so getting the right mix of skilled workforces that would help maximize the firm's productivity and profit. Based on the theory of demand and supply, when the supply of skilled workforce increases, the demand goes down and the cost of production also goes down. Therefore, the firm can maximize profit by reducing the cost of production and employ skilled workforces (Catia, 2019). In the immigrants and firm productivity equation, the additional workforces will increase the firm's productivity so they increase the pool of skilled workforce from which the firms can choose workers. There are differential costs of hiring workers and the most important priority is the skill level of the workers (Harashima, 2019). Immigrant workers can be paid as expatriates or be offered a lower salary on contract. With the firm focusing on making a profit.


Harashima, T. (2019). A Theory on the Economic Impacts of Immigration. Ishikawa Japan.

Catia, N. (2019). Immigration and labor productivity: New empirical evidence for Spain. IZA Discussion Papers, No. 7297, IZA - Institute of Labor Economics.

Mitaritonna, C., Orefice, G., & Peri, G. (2017). Immigrants and firms' outcomes: Evidence from France. European Economic Review, 96(8063), 62-82. doi: 10.1016/j.euroecorev.2017.05.001.

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