U.S. High-Skilled Immigration, Innovation, and Entrepreneurship: Empirical Approaches and Evidence

by William R. Kerr

Overview — In the 2008 Current Population Survey, immigrants represented 16 percent of the United States workforce with a bachelor's education. Moreover, immigrants accounted for 29 percent of the growth in this workforce during the 1995-2008 period. Exceeding these strong overall contributions, the role of immigrants within science, technology, engineering, and mathematics (STEM) fields is even more pronounced. Even so, the importance of the global migration of STEM talent has been under-studied. In this paper, which focuses exclusively on the United States' experience, the author reviews academic work regarding the effects of global migration on innovation and entrepreneurship. Findings show that while some aspects of the phenomenon are well understood, such as the quantity and quality of immigrants, scholars still have very little insight on others, such as return migration. Overall, immigration has clearly been essential for the United States' leadership in innovation and entrepreneurship. There is also evidence of positive impacts of high-skilled diasporas for home countries, although the ledger that can be measured in the United States remains incomplete. Key concepts include:

  • Scholars are just beginning to trace out and quantify how the economy reacts to immigration. Academic research on low-skilled immigration has a longer history, and efforts to evaluate high-skilled immigration are just starting to define its unique attributes from general immigration (e.g., the impact of firm sponsorship of H-1B visas).
  • In terms of quantity, immigrants generally account for about a quarter of the US workforce engaged in science, technology, engineering, and mathematics (STEM) fields. This share is growing rapidly.
  • In terms of quality, most immigrants engaged in STEM work in the United States are better trained for this work than natives (e.g., chosen academic fields of study, levels of education obtained). Conditional on these education choices, immigrants and natives appear quite comparable in quality, with some greater potential for the "long tail" of superstars.
  • Immigration is associated with higher levels of innovation for the United States. The short-run consequences for natives are minimal. However, this aggregate achievement involves some displacement of U.S. workers, and the long-run impact is less understood. Long-run estimates range from very positive to substantial crowding-out depending upon the study and technique.
  • High-skilled immigrants promote knowledge flows and foreign direct investments to their home countries. It is still unclear whether this benefit fully compensates the country for the potential negative consequences from the talent migration.

Author Abstract

High-skilled immigrants are a very important component of U.S. innovation and entrepreneurship. Immigrants account for roughly a quarter of U.S. workers in these fields, and they have a similar contribution in terms of output measures like patents or firm starts. This contribution has been rapidly growing over the last three decades. In terms of quality, the average skilled immigrant appears to be better trained to work in these fields, but conditional on educational attainment of comparable quality to natives. The exception to this is that immigrants have a disproportionate impact among the very highest achievers (e.g., Nobel Prize winners). Studies regarding the impact of immigrants on natives tend to find limited consequences in the short-run, while the results in the long-run are more varied and much less certain. Immigrants in the United States aid business and technology exchanges with their home countries, but the overall effect that the migration has on the home country remains unclear. We know very little about return migration of workers engaged in innovation and entrepreneurship, except that it is rapidly growing in importance.

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