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Economic Impacts of High-Skilled Immigration

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  • Kauhanen, Antti
  • DeVaro, Jed

Abstract

This brief examines the economic impacts of skilled immigration on firms, innovation, and labour markets. Research shows that skilled immigration generally has positive effects on firm performance, productivity, and innovation. Immigrant inventors play a crucial role in innovation, with evidence showing they produce a disproportionate share of patents and have positive spillover effects on native collaborators. Contrary to common fears, most studies find that skilled immigration does not negatively impact native workers’ wages or employment on average. In fact, it can benefit natives with complementary skills. The availability of skilled immigrant labour also influences firms’ location decisions, with restrictions on immigration leading to increased offshoring of jobs. While the fiscal impacts of immigration are debated, traditional accounting methods suggest a positive fiscal impact for highly educated immigrants. However, these estimates often fail to account for indirect effects like productivity gains and innovation. Overall, the evidence indicates that skilled immigration is a valuable tool for addressing productivity challenges and innovation needs, particularly in countries facing declining working-age populations.

Suggested Citation

  • Kauhanen, Antti & DeVaro, Jed, 2024. "Economic Impacts of High-Skilled Immigration," ETLA Brief 140, The Research Institute of the Finnish Economy.
    • Handle: RePEc:rif:briefs:140
    as

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    File URL: https://www.etla.fi/wp-content/uploads/ETLA-Muistio-Brief-140.pdf
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    References listed on IDEAS

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    1. Andreas Beerli & Jan Ruffner & Michael Siegenthaler & Giovanni Peri, 2021. "The Abolition of Immigration Restrictions and the Performance of Firms and Workers: Evidence from Switzerland," American Economic Review, American Economic Association, vol. 111(3), pages 976-1012, March.
    2. Jennifer Hunt & Marjolaine Gauthier-Loiselle, 2010. "How Much Does Immigration Boost Innovation?," American Economic Journal: Macroeconomics, American Economic Association, vol. 2(2), pages 31-56, April.
    3. Michael A. Clemens, 2021. "The Fiscal Effect of Immigration: Reducing Bias in Influential Estimates," RF Berlin - CReAM Discussion Paper Series 2134, Rockwool Foundation Berlin (RF Berlin) - Centre for Research and Analysis of Migration (CReAM).
    4. William R. Kerr & William F. Lincoln, 2010. "The Supply Side of Innovation: H-1B Visa Reforms and U.S. Ethnic Invention," Journal of Labor Economics, University of Chicago Press, vol. 28(3), pages 473-508, July.
    5. Anthony Edo, 2019. "The Impact Of Immigration On The Labor Market," Journal of Economic Surveys, Wiley Blackwell, vol. 33(3), pages 922-948, July.
    6. Giovanni Peri & Kevin Shih & Chad Sparber, 2015. "Foreign and Native Skilled Workers: What Can We Learn from H-1B Lotteries?," NBER Working Papers 21175, National Bureau of Economic Research, Inc.
    7. Anthony Edo & Lionel Ragot & Hillel Rapoport & Sulin Sardoschau & Andreas Steinmayr & Arthur Sweetman, 2020. "An introduction to the economics of immigration in OECD countries," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 53(4), pages 1365-1403, November.
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    More about this item

    Keywords

    Productivity; Innovations;

    JEL classification:

    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity

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