The impact of migrant labors on Russian economy: production function approach

Abstract

Over the past few decades, the major flow of labor migrants coming to Russia happened because of higher wage, employment, and similar culture. This paper explored the direct economic contribution of labor migrants in Russian national income through their productivity performance. This empirical study analyzed the impact of migrants on the growth of GDP using Cobb Douglas production approach through linear transformation from the logarithmic form and showed the positive consequences of labor migrants in Russian economy. The study conducted quantitative analysis that was an anticipated outcome from a model which was being created to determine how much migrant workers contributed to the Russian economy which have been successful through the lenses of national income. All data in this study used a repository of 15 years of data from 2000 to 2014 that were collected yearly. The main data sources of this study are Russian Federal State Statistics Service, the World Bank data source and FRED Economic Data. This paper also investigated the heteroscedasticity and endogeneity test among the variables in order to check the robustness of the regression results of the first model. The study introduced a new instrument variable that was constructed with the ratio of GDP per capita in Russia and GDP per capital in the source countries. After that the instrument was implemented into the previous model through two stage least square method. Therefore, the statistical analysis of this empirical research inferred that migrants have a positive impact on Russian’s economy resulted about 10% of national income which has significant growth due to migrants’ employment.