Innovation Policy and the Economy

April 8, 2014
William Kerr and Josh Lerner of Harvard University and Scott Stern of MIT, Organizers

George Borjas, Harvard University and NBER, and Kirk Doran, University of Notre Dame

How High-Skill Immigration Affects Science: Evidence from the Collapse of the USSR

A commonly cited reason for increasing high-skill immigration to the United States is the perceived positive impact that such immigrants would have on the course of U.S. science. While it is true that scientific research is particularly important for long-term economic wellbeing and that immigrants have historically accounted for a disproportionate share of U.S. scientific output, the causal impact of an increase in the number of high-skill immigrants on U.S. science is not obvious. An influx of new knowledge and knowledge-generating workers may create knowledge spillovers: the productivity-enhancing peer effects that must be present if high-skill immigration is to have beneficial long-run effects. However, scientists must also compete for scarce resources such as jobs, journal space, and attention in order for their research to be produced, disseminated, and used. Borjas and Doran review the evidence reported in their recent work in 2012 and 2014 that simultaneously addresses both of these conflicting forces. The research uses the "natural experiment" created by the collapse of the Soviet Union which led to the largest sudden influx of scientific personnel and ideas into the United States since World War II. In this context, there is little evidence of improved productivity among pre-existing scientists after a sizable supply and idea shock.

John Bound, University of Michigan and NBER; Murat Demirci University of Virginia; Gaurav Khanna University of Michigan; and Sarah Turner, University of Virginia and NBER

Finishing Degrees and Finding Jobs (appendix)

The rising importance of information technology (IT) occupations in the U.S. economy has been accompanied by an expansion in the representation of high-skill foreign-born workers in this area. To illustrate, the share of the foreign-born in this occupation increased from about 15.5 percent to about 31.5 percent between 1993 and 2010, with the increased representation of foreign-born particularly marked among those younger than 45. Bound, Demirci, Khanna, and Turner focus on understanding the role that U.S. higher education and immigration policy play in this transformation. Degree receipt from U.S. colleges and universities is an important pathway to participation in the U.S. labor market in IT fields, with foreign-born workers with U.S. degree credentials particularly likely to stay in the United States. For many workers from abroad, including countries like India and China where wages in IT fields lag those in the United States, there is a substantial return to finding employment in the United States even as temporary work visa policies may limit entry. Limits on temporary work visas, which are particularly binding for those educated abroad, likely increase the attractiveness of degree attainment from U.S. colleges and universities as pathways to explore opportunities in the U.S labor market in IT and in other occupations.

Sari Pekkala Kerr, Wellesley College; William Kerr; and William Lincoln, John Hopkins University

Firms and the Economics of High-Skilled Immigration

Firms play a central role in the selection, sponsorship, and employment of skilled immigrants entering the United States for work through programs like the H-1B visa. This role has not been widely recognized in the literature, and the data to better understand this role have only recently become available. Kerr, Kerr, and Lincoln discuss the evidence that has been assembled to date on these issues and the open areas that call for more research. Since much of the U.S. immigration process for skilled workers rests in the hands of employer firms, a stronger understanding of these implications is essential for future policy analysis, particularly for issues relating to fostering innovation.

Richard Freeman, Harvard University and NBER

Immigration, International Collaboration, and Innovation: Science and Technology Policy in the Global Economy

The globalization of science and engineering that has characterized the beginning of the twenty-first century has substantial implications for U.S. science and technology policy. Freeman shows that globalization of scientific and technological knowledge has reduced the U.S. share of world scientific activity, increased the foreign-born proportion of scientists and engineers in U.S. universities and in the U.S. labor market, and led to greater U.S. scientific collaborations with other countries. China's massive investments in university education and R&D have in particular made it a special partner for the United States in scientific work. The author suggests that aligning immigration policies more closely to the influx of international students on the supply side and requiring that firms with R&D tax credits or other government R&D funding develop "impact plans" to use their new knowledge to produce innovative products or processes in the United States could help the country adjust to the changing global economy.

Paula Stephan, Georgia State University and NBER; Chiara Franzoni, Politecnico di Milano; and Giuseppe Scellato, Politecnico di Torino

International Competition for PhDs and Postdoctoral Scholars: What Does (and Does Not) Matter

Stephan, Scellato, and Franzoni explore factors that lead students and postdoctoral scholars who train outside their native country to come to the United States rather than go to a third country for study. They use data they collected in 2011 as part of the GlobSci project of research-active scientists working in 16 countries. Their research suggests that public policy plays an important role in attracting the foreign born to study in a country and that the United States is a magnet for foreign students and postdocs precisely because the United States has excelled in creating a strong educational and research environment. The authors find that students who come to the United States score factors that are proxies for the research environment higher than do students who go to most other countries for training.