Immigration and structural change: Evidence from post-war Germany

Does immigration accelerate sectoral change from low- to high-productivity sectors? This paper analyzes the effect of one of the largest population movements in history, the influx of millions of German expellees to West Germany after World War II, on Germany's speed of transition away from low-productivity agriculture. A simple two-sector specific factor model, in which moving costs prevent the marginal product of labor to be equalized across sectors, predicts that expellee inflows boost output per worker by expanding the high-productivity non-agricultural sector but decrease output per worker within sectors. Using German district-level data from before and after the war, we find empirical support for these predictions.