Does Institutional Quality Shape the Immigration–Growth Nexus? Evidence from the Organization for Economic Co-operation and Development (OECD) Countries

Immigration has long been examined for its potential to influence economic outcomes, but empirical evidence remains inconclusive, particularly regarding the conditions under which immigration contributes to growth. This study investigates whether institutional quality moderates the effect of immigration on economic growth in 25 OECD countries over the period 2010–2024. Drawing on the institutional theory and using a purposive sampling strategy, the analysis employs the Generalised Method of Moments (GMM) estimator to account for endogeneity, autocorrelation, and unobserved heterogeneity in the panel data. The key variables include real GDP growth (dependent), immigration rates measured as immigrant stock relative to total population (independent) and a composite institutional quality index (moderator), encompassing rule of law, control of corruption and government effectiveness. Results reveal that immigration and institutional quality alone do not exhibit statistically significant effects on economic growth. However, their interaction is both positive and statistically significant, indicating that immigration contributes positively to economic performance only in the presence of strong institutional frameworks. Robustness diagnostics affirm the validity of the instruments and the model specification. These findings contribute to the migration-development literature by bridging institutional theory with contemporary immigration discourse. They also provide critical policy implications for governments and international agencies seeking to harness immigration as a catalyst for sustainable and inclusive growth.