The Effect of Immigration in a Frontier Economy: Brazil 1890-1920
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Abstract: How does migration affect the economic development in the receiving country? We contribute to answering this question by investigating the impact of European migration on the agricultural sector in Brazil during the Age of Mass Migration, specifically the period 1890-1920. Brazil was one of the largest recipients of European migrants in this period and over 70 per cent of its workforce worked in agriculture. To achieve causal identification, we exploit the staggered rollout of the rail network in combination with aggregate inflows of migrants to instrument the geographical distribution of migrant settlement across Brazil.
The strategy relies on several large shocks unrelated to local economic conditions affecting aggregate migratory flows. Our results indicate that immigration boosted the agricultural sector, as evidenced by higher agricultural land prices in areas where more migrants settled, with no apparent adverse effects on human capital accumulation and other economic activities. This in part explained by a more intensive cultivation of the land. We investigate a large number of possible channels for these results, including changes to the labour supply, land ownership, land quality, the crop mix, market potential, and capital intensity, finding that these are unable to explain our results.