Did Malta’s Accession to the EU Raise its Potential Growth?

This paper evaluates the impact on Malta’s potential output growth caused by increased migration. Administrative data show that the proportion of foreign workers has risen from 1.3% of the workforce in 2000 to 10.1% in 2014. While the bulk of these migrants are in managerial, professional, and technical occupations, there are a growing number in blue-collar occupations, along with clerical or auxiliary jobs. Migrant workers is concentrated in certain sectors, with half of them in (1) entertainment and recreation, (2) professional services and administrative support, and (3) hotels and restaurants. The estimates presented here suggest that from 2010 to 2014, foreign workers contributed annually to 0.6 percentage points of potential output growth, helping to boost it to an average of 2.5% per annum, one of the highest in the Euro area, and slightly above the average observed during the years immediately preceding Malta’s admission to the European Union.