Abstract:
The paper investigates the potential impact of foreigners on economic development. Historic examples, various contemporary empirical observations and theory support the working thesis that regions which face a high quota of foreign residents may benefit from human capital spillovers between different ethnic groups. It is argued that immigration brings about both a more effective division of labour and mutual learning and leads thereby to higher per-capita-income. We apply these findings to the current economic sickliness of East-Germany and conclude that in this region a more committed immigration policy may prove to be an particularly appropriate remedy.