The Impact of Immigration on Skills,Innovation and Wages: Education Matters more than where People Come from |
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| Affiliation: | 1. Department of Economics, Hanyang University, ERICA Campus, Ansan, South Korea;2. Indian Institute of Foreign Trade, 1583 Madurdaha, Kolkata 700107, India;3. CES-Ifo, Munich, Germany;4. Women’s Christian College 6, Greek Church Row, Kolkata 700026, India;1. Department of Economics, Obafemi Awolowo University, Ile-Ife, Osun State, Nigeria;2. Department of Economics, University of Lagos, Lagos, Nigeria;1. Department of Economics and Property, School of Economics and Finance, Curtin University, Bentley, 6102 WA, Australia;2. School of International Relations, Sun Yat-sen University, China;3. Western Australian School of Mines, School of Management, Curtin University, Perth, Australia;1. Korea Rural Economic Institute, Naju-si, Jeollanam-do, South Korea;2. University of Missouri, 200 Mumford Hall, Columbia, MO 65211, United States;1. Tekirdag Namik Kemal University, Tekirdag, Turkey;2. University of Sharjah, Sharjah, United Arab Emirates;1. Indian Institute of Foreign Trade, Kolkata, India;2. Centre for Training and Research in Public Finance and Policy (CSSSC), Calcutta, India;3. CES–ifo, Munich, Germany;4. GEP, Nottingham, UK;5. National Law University, Delhi, India;6. Indian Statistical Institute, Kolkata, India;1. INAPP, National Institute for Public Policy Analysis, Rome, Italy;2. LUISS School of European Political Economy, Rome, Italy;3. Sant''Anna School of Advanced Studies, Pisa, Italy;4. London School of Economics and Political Sciences, London, UK;5. GLO, Global Labor Organization, Essen, Germany |
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| Abstract: | With the ensuing immigration reform in the US, the paper shows that targeted skilled immigration into the R&D sector that helps low-skilled labor is conducive for controlling inequality and raising wage. Skilled talent-led innovation could have spillover benefits for the unskilled sector while immigration into the production sector will always reduce wage, aggravating wage inequality. In essence, we infer: (i) if R&D inputs contributes only to skilled sector, wage inequality increases in general; (ii) for wage gap to decrease, R&D sector must produce inputs that goes into unskilled manufacturing sector; (iii) even with two types of specific R&D inputs entering into the skilled and unskilled sectors separately, unskilled labor is not always benefited by high skilled migrants into R&D-sector. Rather, it depends on the importance of migrants’ skill in R&D activities and intensity of inputs. Empirical verification using a VAR model in the context of the USA confirms the conjectures, and the empirical results substantiate our policy-guided hypothesis that skilled immigration facilitates innovation with favorable impact on reducing wage-gap. Inclusive immigration policy requires inter-sectoral diffusion of ideas embedded in talented immigrants targeted for innovation. |
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| Keywords: | Immigration Innovation Wage gap General equilibrium VAR model |
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