Friday, May 2, 2008

Immigration and Innovation

What is the impact of skilled immigration on innovation? A new paper by Jennifer Hunt, prepared for an NBER conference on labor studies attempts an answer. From the abstract (HT):
I combine patent, decennial census and other data to measure the extent to which skilled immigration increased innovation in the United States from 1950-2000. I instrument the change in the share of skilled immigrants in a state with the initial share of immigrant high school dropouts from Europe, China and India, and consider changes of between ten and 50 years. I find that a one percentage point rise in the share of immigrant college graduates in the population increases patenting by 8-15%; the equivalent range for immigrants with post-college education is 15-33%. A one percentage point rise in the share of immigrant scientists and engineers in the workforce increases patenting by at least 41%. The effects are similar in the short and long run, and appear to be much larger than the effect of skilled natives, especially in the short run. This may be related to my finding that natives are crowded out by immigrants in the short run, but not in the long run. My analysis shows the importance of convergence among states for the evolution of patents. [emphasis added.]
There are plenty of studies that attempt to estimate the costs of immigration, and fewer that measure the benefits, but this paper fits into a unique niche because few authors have investigated this specific link, at least as far as I know. If you take these results seriously and apply them in a policy context, I think it clear that the paper supports Richard Florida's idea that the world is in a global competition for talent, and that while the US has been successful at attracting talent in the past, we are not well suited to compete in the future. Any thoughts from our immigration experts?


  1. I'm not an immigration expert, but the Fresh Air today on retirement savings made me think of an immigration-innovation related question along these lines. For economies with large social security commitments, isn't increasing the number of workers just as important as increasing the productivity of workers (i.e. innovation)? If productivity increases but fewer workers are supporting more retirees, then the government must take a larger share of younger workers' incomes. If high rates of innovation are required in the long-run to keep an economy globally competitive (Shumpeter's Century and all), then governments need to focus on both growing the working population and encouraging innovation.

  2. That’s a great point. Increasing immigration limits has been talked about as one potential method of keeping the worker-retiree ratio from getting too out of whack and some member of Congress have included immigration reform as part of broader social security reform packages. An older GAO report (2002) has this sobering news: “Increased immigration, however, poses complex issues and is unlikely to be the sole solution. For example, according to a recent United Nations study, it would take more than a sustained tenfold increase in projected immigration to maintain the ratio of workers to retirees at recent levels. These are issues that the Congress may wish to explore further in the next few years.” (pdf)