Abstract

I study a settlement policy implemented by the Chilean government between 1882 and 1904 to analyze the relationship between European immigration and the human capital of natives. Using historical censuses, I show that this policy was successful in recruiting skilled Europeans, who located in different parts of the country. Using a panel data of provinces observed between 1860 and 1920, I find a strong, positive, and robust correlation between recruited Europeans and the human capital of natives. This finding is not driven by changes in the provision of public goods or regional shocks. However, the arrival of Europeans is associated with an increase local economic output 50 years after the policy was terminated. These changes in the local economy, together with narrative historical evidence, suggest that a modernization of economic activities is a potential explanation for the increase in the human capital of natives.