The Impact of Immigration on Skills, Innovation and Wages: Education Matters more than where People Come from

Gouranga Gopal Das, Sugata Marjit and Mausumi Kar

Journal of Policy Modeling, 2020, vol. 42, issue 3, 557-582

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.

Keywords: Immigration; Innovation; Wage gap; General equilibrium; VAR model (search for similar items in EconPapers)
JEL-codes: F22 J31 O15 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (11)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jpolmo:v:42:y:2020:i:3:p:557-582

DOI: 10.1016/j.jpolmod.2020.02.003

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