High-Skill Immigration, Innovation, and Creative Destruction
42 Pages Posted: 16 Jul 2018 Last revised: 1 May 2021
Date Written: July 2018
Economists have identified product entry and exit as a primary channel through which innovation impacts economic growth. In this paper, we document how high-skill immigration affects product reallocation (entry and exit) at the firm level. Using data on H-1B Labor Condition Applications (LCAs) matched to retail scanner data on products and Compustat data on firm characteristics, we find that H-1B certification is associated with higher product reallocation and revenue growth. A ten percent increase in the share of H-1B workers is associated with a two percent increase in product reallocation rates – our measure of innovation. These results shed light on the economic consequences of innovation by high-skill immigrant to the United States.
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