Immigrants Are Assets For Innovation

In this presidential election, the debate on immigration has degenerated into implicit labeling of immigrants as security and economic threats to Americans. GOP candidates complain that we should secure the border first, and Democratic candidates would like to reform the broken system.

The partisan attempt for immigration reform died in the Congress.

President Obama, tired of waiting for the "DREAM Act", issued an executive order in 2014 which, among other provisions, allowed parents of U.S. citizens and permanent residents to request deferred action and employment authorization for 3 years, if they have lived in the US continuously since January 1, 2010.

Presidential action has been challenged in lower courts that have put an injunction on the order; hence the issue is now before the Supreme Court. This controversy has sidestepped the discussion on the benefits of immigration and immigration reform that is in the best interest of the US.

We all have heard the usual argument advanced by those who are fearful of immigration, that it reduces wages and employment opportunities Americans. Many may also be familiar with the counter argument that immigrants do the jobs that natives do not like to do. This argument usually applies to low paid jobs in farms, slaughterhouses, fast food industry and other hard labor jobs in construction. What is lost in this debate is the discussion on immigrants who foster innovations, create new businesses, increase productivity of others and generate employment opportunities for natives.

Immigrants also bring their cultures, views and behaviors toward economic and political institutions that affect innovations and productivity. Immigrants may also burden the infrastructure and impose congestion costs that lead to inefficiencies and loss of productivity. Policy makers have to weigh the trade-off in implementing immigration policy in addition to ethical and moral issues.

In this blog I discuss the impact of immigrants on innovation and productivity. Immigrants are self-selected people. In general, in free societies like the US, where there is opportunity and encouragement for individual achievement, immigrants are willing to take risks by moving to a different country with different cultural, economic, political, social and institutional environments with uncertain future prospects for economic survival and success. However, the attitude toward risk taking is an essential ingredient for innovations.

Research by Peter Moser et al., American Economic Review, 104(10), 2014, shows that Jewish émigré scientists, who were forced out of their professions by Nazi Germany, revolutionized US innovations. Moser finds that "US inventions increased by 31 percent after 1933 in fields of German émigrés." This inventive activity, evidenced by patent activity in chemical fields, increased not only due to entry of new researchers in the fields of émigrés but also due to research collaborations with the émigrés. This spillover effect affirms other research on human capital. Innovations provide a fertile ground for jobs creation and employment opportunities.

The paper by Jennifer Hunt and Marjolaine Gauthier-Loiselle, How Much Does Immigration Boost Innovation, NBER, September 2008, shows that immigrant college graduates do not crowd out native inventors. They significantly affect inventive activity as measured by patents. The results show that a 1.3 percent increase in immigrants increased per capita patents by 20 percent (including positive spillover effects) for the period 1990-2000. The impact of post college immigrants is even larger. A 0.7 percentage point increase in their share increased per capita patents by 21 percent, and 0.45 percent increase in scientists and engineers increased per capita patents by 22 percentage points. The US politicians should be pleased to know that immigrants arriving in the US in the last 5 years are the most educated ever (see an article by Richard Fry for the Pew Research Center, October 5, 2015).

Another paper by Mariya Aleksynska and Ahmed Tritah, Economic Inquiry, January 2015, finds that "immigration has a positive and sizable impact on income and labor productivity of host countries." The evidence on beneficial effects of immigration is overwhelming. Immigration provides diversity of talents thus creating churn in the economy. James Surowiecki argues in The Wisdom of Crowds that diversity of cognitive intelligence and knowledge overcomes sameness of thinking among homogenous groups, and "...expands a group's set of possible solutions and allows the group to conceptualize problems in novel ways."

Immigrations' share in OECD countries, including US, has been increasing over time. However in 2000, relative to the natives, the share of younger (25 to 54 years) immigrants is rising more than the share of older immigrants. This means that these immigrants will make a positive contribution to the countries' economies for a long time. History is full of episodes where immigrants have made enormous contributions in arts, sciences and inventions in the receiving countries.

The current negative posture of GOP presidential candidates and their supporters on immigration is on the wrong track. Rather than creating fear of immigrants, they should lead the voters in the positive and balanced direction of immigration policy. Sound bites on negative effects without any grounding in facts is counterproductive for the wellbeing of Americans and the future of the nation as a whole.

Perhaps the hysteria against immigration will calm down after the elections and common sense will prevail in designing an immigration policy that maintains the integrity of borders, but at the same time recognizes the value of immigration for the benefit of the country. As Erick Weiner, the author of The Geography of Genius: A Search for the World's Most Creative Places, From Ancient Athens to Silicon Valley, states in his essay in The Wall Street Journal, January 16-17, 2016, ..."SCAN THE ROSTER of history's intellectual and artistic giants, and you quickly notice something remarkable: Many were immigrants or refugees..."

Mathur is former chair and professor of economics and now professor emeritus, Department of Economics, Cleveland State University, Cleveland, Ohio. He resides in Ogden, Utah.