The role of migration-innovation nexus for population aging

Abstract Immigration can potentially address demographic challenges in developed countries by introducing young workers into the labor markets but, at the same time, it can increase competition for jobs with socio-economic effects that need to be carefully managed. Prior research has focused on the impact of immigration on local labor markets taking into account the skills of native-born inhabitants and immigrants. In contrast, analyses of age-specific effects are scarce despite the fact that immigration is likely to affect workers in different age-cohorts to different extents, with various policy implications. In addition, firms’ innovative capacity may contribute to shaping the effects of immigration. This work contributes to the existing literature by examining the relationships between immigration, labor market dynamics, and innovation in Western Europe between 2011 and 2019. The analysis uses microdata drawn from the Labour Force Surveys, from the OECD REGPAT database, and from the European Social Survey. The results show that immigrants are more likely to substitute younger native workers, while adult workers benefit from immigrants employed in complementary tasks. This substitution/complementarity nexus increases in the more innovative sectors. From a policy standpoint, these findings highlight the need for age-specific policies and training programs in order to mitigate the adverse effects of immigration and to maximize growth-promotion.