Innovation, Skilled Immigrants, and Why We Need More of Them

The immigration debate playing out in the United States is beleaguered by concerns over whether unskilled immigrant workers are undermining the economic position of low-skilled American citizens. But concern over low-skilled immigration may be overshadowing discussion of high-skilled immigration, a less controversial but arguably more impactful domain of immigration policy. Economists Jennifer Hunt and Marjolaine Gauthier-Loiselle, in a 2010 paper, shed new light on the significant value skilled immigrants bring by offering a key insight into their impact on patenting.

Hunt and Gauthier-Loiselle use patenting a new product or technology as a proxy for economic innovation in their paper because patents embody a newfound capacity to produce novel goods or similar goods at lower costs. During the 1990s, immigrants increased patenting by as much as 18 percent, which translated into approximately 1.4 to 2.4 percent increased growth in GDP.

The authors begin their study by defining skilled immigrants within three overlapping categories: those with college degrees, those with post-college degrees, and those working specifically in science and engineering. Using data from the 2003 National Survey of College Graduates, the researchers analyze this data using regression analysis that separates differences in patenting rates by characteristics such as college attainment, post-college attainment, STEM training, and whether an individual is foreign-born.

The study finds that skilled immigrants both apply for and receive patents at higher rates than native-born individuals. This is mainly because immigrants tend to work in science and engineering at higher rates. Digging deeper, the researchers show that foreign-born persons with a college degree patented twice as often per capita as natives with a college degree (1.9 percent of immigrants compared to 0.9 percent of natives). Immigrants with post-college degrees patented at a rate of 3.6 percent per capita, compared to 1.3 percent of natives with post-college degrees. When it came to people working in science and engineering, the differences are not as large, but they are still evident. Immigrant scientists and engineers patented at a 6.2 percent per capita, while native scientists patented only at a rate of 4.9 percent. In short, immigrants living in the United States hold more patents per capita than natives. In addition, the authors found no difference in patent rates based on skill level, controlling for age, sex, and employment status. This implies that the only difference causing the higher rates of patenting by immigrants was their higher rates of education and work in science and engineering.

The authors then checked for spillover effects from immigrants’ increased patenting that might alter the rate of patenting by natives. A positive spillover could be that more skilled immigrants provide a critical mass of researchers, speeding up patent production for immigrants and natives alike. A negative spillover effect could be that natives are deterred from entering the fields of science and engineering because of competition with immigrants. The researchers used U.S. census data from 1940–2000 as well as data from the U.S. Patent and Trademark Office and found positive spillover effects. States that had a larger growth in skilled immigrants had a larger increase in patents than would be expected given individual data alone. When skilled immigrants clustered in similar locations, their clustering gave an added boost to patenting rates.

Using a crude calculation based on work done by Jeffrey L. Furman, Michael E. Port and Scott Stern in 2002, which showed a correlation between patent rates and a country’s GDP, the researchers concluded their study with an estimate that the additional patents generated in the U.S. by skilled immigrants during the 1990s added 1.4 to 2.4 percent to GDP growth.

By looking at patenting rates between immigrants and natives in the United States, the researchers conclude that among college-educated, post-college educated, and scientists and engineers, immigrants make up a larger share of patent creators than the native population. Their analysis shows that this is driven mainly by the science and engineering education of immigrants. Thus, in a period of sluggish growth and stagnating incomes, policy could be beneficially tailored to favor more skilled immigration.  

Article source: Hunt, Jennifer and Marjolaine Gauthier-Loiselle. “How Much Does Immigration Boost Innovation?” American Economic Journal: Macroeconomics 2(2) (2010): 31-56.

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