Introduction

The research explores significant transformations in the adult populations of OECD countries between 1990 and 2024. Over this period, native-born population growth, once substantial, slowed dramatically and turned negative in many regions by the 2020s. Total population growth was maintained largely due to immigration, with the majority of this growth driven by arrivals from non-OECD countries, primarily from Eastern Europe, Asia, Africa, and Latin America. The study aims to analyse the macroeconomic consequences of this demographic shift, focusing on variables such as GDP per capita, investment, human capital, and total factor productivity (TFP).

Trends: the evolution of immigration, local demographics and skills

A new harmonised dataset reveals that net immigration rates into OECD countries rose as native populations declined. In many European countries, migrant inflows became the primary source of labour force growth. Notably, the majority of net immigration to EU-14 plus countries was high-skilled, defined by tertiary education. In more than 81% of observations, net immigration was more skilled than the local population, thereby increasing the human capital intensity of the receiving countries. The study confirms that there is no significant correlation between native demographic decline and increased immigration, suggesting that immigrants do not simply ‘replace’ natives in a mechanical fashion.

Predictors of immigration: push-factors, international migration crises and receiving country policies

The researchers examined whether push factors, global crises, and specific national policies could predict immigration dynamics. They found that traditional ‘shift-share’ indices and policy indicators (such as the IMPIC index) had limited predictive power for cross-country variation in immigration rates. However, an index of ‘external regulation’—governing rules for entry and residence—showed some power in predicting flows within the EU-14 plus sample. Despite these efforts to model flows, large immigration shocks and sudden surges remained largely idiosyncratic and unpredictable.

Large immigration shocks and immigration surges

The report defines ‘immigration shocks’ as five-year periods of unusually high immigration rates, exceeding the 75th percentile of the distribution. Examples include Israel in the 1990s and Spain, Italy, and Greece in the 2000s. ‘Immigration surges’ are defined as sudden, sustained jumps in immigration rates. These episodes are used to assess causal impacts, as they are less correlated with past economic trends. The analysis suggests that such surges often lead to investment booms as firms respond to the expanded labour and skill supply.

Panel analysis: predictions of net immigration

Analysis at the national level showed that persistent networks and uniform increases in non-OECD emigration rates reduced the time variation needed for traditional shift-share instruments to be effective. Conversely, regional analysis using NUTS-2 regions within the European Union demonstrated that shift-share instruments are more powerful at the local level. Results from the regional panel confirm a positive association between immigration and long-run labour productivity, corroborated by a two-stage least squares (2SLS) approach.

Immigration’s impact on GDP components: 10-year local projections

Using local projection methods, the study measures the dynamic response of crucial aggregate economic variables over five- and ten-year horizons. The results indicate that net immigration stimulates almost all components of labour productivity. Unlike native population changes, immigration shows a positive and often significant predictive power for future labour productivity growth, TFP, human capital accumulation, and physical capital investment. The impacts are persistent, with effects often accumulating over a decade.

Estimation results

For the full OECD sample, an increase in immigrants equivalent to 1% of the population is associated with a 1.2% increase in GDP per worker growth within five years, rising to 1.9% over ten years. A substantial portion of this growth—approximately 1.2% in the long run—is attributed to faster capital per worker accumulation (investment). High-skilled immigration specifically drives positive outcomes in TFP and human capital. In contrast, low-skilled immigration was found to be neutral regarding TFP and investment. The research found no evidence of ‘saturation’, meaning the positive effects did not decline even in countries with already large immigrant shares.

Estimated impulse responses from regional analysis

The regional analysis of European NUTS-2 regions supports the national findings. OLS and 2SLS estimates confirm a positive correlation between net migration and GDP per capita growth, labour productivity, and capital accumulation. These effects are primarily driven by increased investment in physical capital. Consistently with national results, native demographic changes failed to predict these positive economic outcomes, with coefficients remaining near zero.

Discussing the results and connecting to the micro literature

The macro findings are consistent with recent microeconomic evidence. Studies show that high-skilled immigrants, particularly in STEM fields, contribute significantly to innovation and patenting. Furthermore, immigrants are more entrepreneurial than native-born populations, accounting for a disproportionate share of new business formations. The strong response of capital and start-ups suggests that immigration helps relax labour market bottlenecks in economies where skills have become scarce.

Conclusions

The report concludes that OECD and European economies have likely benefited from non-OECD immigration through enhanced labour productivity growth. Illustrative cases highlight the magnitude of these effects: in Canada, where the immigrant share rose by 17 percentage points, the inflow predicted a 19.9% higher growth in GDP per worker—accounting for more than half of the country’s actual productivity growth. Similar patterns were observed in the UK and France. While caution is advised regarding distributional effects and political implications, the study suggests that by increasing the overall ‘economic pie’, immigration can potentially benefit all citizens when accompanied by appropriate redistribution.