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Home / Publications / Research / Economic Brief / 2021

Economic Brief
March 2021, No. 21-08

College-Educated Immigrants Bolster U.S. Productivity
Article by: Nicolas Morales

The United States is the largest destination in the world for college-educated
immigrants, but their path to employment in this country has become
increasingly di cult during the past decade, a condition that can hinder
productivity growth. This brief discusses the main contributions that collegeeducated immigrants make to U.S. productivity growth, such as providing scarce
skills that supplement and complement those of native workers, contributing
disproportionately to innovation and promoting job creation in the United States
by foreign-based multinational corporations.
Attracting talented foreign workers bolsters the domestic economy because immigrants
bring new skills, information and knowledge that improve productivity. This brief focuses on
immigration of college-educated workers to the United States during the past 20 years.
Looking at college-educated workers separately is important because the path for
immigration tends to be very di erent for workers with college degrees, particularly in the
United States. Immigrants with college degrees come to the United States predominantly
through the H-1B program or other employment-based visa programs, while those without
college degrees come to the country predominantly through the family reuni cation path.
In the H-1B program, employers select and sponsor immigrants to work in the United
States for three years, with the option to renew for three additional years. Once the H-1B
visa expires, employers can help those immigrants obtain green cards that allow them to
continue working in the United States. But the number of employment-based visas
awarded each year is capped, and when the number of applicants exceeds the cap, the
United States allocates the visas through a lottery among all applicants. Both the visa cap
and the lottery system have generated intense policy discussions in recent years.
The left panel of Figure 1 shows that the United States is the main destination in the world
for immigrants with at least one year of college education. The total number was larger
than the next ve nations combined in 2015, and immigrants with some college education

represented 45 percent of all immigrants in the United States by 2019. However, when
looking at the numbers relative to total population, the story is substantially di erent.

The right panel of Figure 1 shows that immigrants with college educations accounted for
more than 13 percent of Australia's population and more than 16 percent of Canada's
population in 2015. Both countries' immigration polices heavily favor skilled workers. The
United States ranks closer to the United Kingdom, with college-educated immigrants
comprising slightly more than 5 percent of the population in 2015.
Countries such as Australia and Canada seem to place higher value on the economic
contributions of college-educated immigrants. These contributions fall into three main
categories. One, immigrants increase productivity by bringing scarce skills that supplement
and complement the skills of native workers. Two, immigrants contribute
disproportionately to innovation. And three, foreign rms who want to invest in the United
States bene t from home-country immigrants who can reduce communication and cultural
barriers. Economic research overwhelmingly concludes that these bene ts exceed any
costs imposed on native workers and that the United States could bene t from reforming
the process for granting work visas.

Bringing Scarce Skills that Complement the Skills of Native Workers
As a rst step toward understanding how immigrants integrate into the U.S. labor market,
we can look at the types of jobs they ll. The top half of Table 1 shows that during the past
20 years, immigrants have become more concentrated in computer science, nursing and
teaching. Immigrants with college degrees are more overrepresented in computer science
than in any other occupation: For every 10 U.S.-born computer scientists, there are 4.2
foreign-born computer scientists. (See the bottom half of Table 1.) Similar patterns emerge
at the industry level (not shown in the table). For every 10 native workers, there are 4.8 and

3.8 immigrants in electrical equipment manufacturing and computer/data processing,
respectively. The education industry also employs disproportionately more immigrants, a
percentage that has grown substantially in the past 20 years.
Immigrants' occupational choices are important to understanding their impact on U.S.
productivity. In research published in 2009 and 2011, Giovanni Peri of UCDavis and Chad
Sparber of Colgate University evaluated whether immigrants perform signi cantly di erent
tasks than natives.1
In the case of college-educated workers, they found that immigrants tend to specialize in
occupations that require quantitative and analytical skills, such as computer programming
and math, while natives tend to specialize in communication and other interactive
occupations, such as management. When there is an increase of college-educated
immigrants working in a given occupation, native U.S. workers in that occupation become
more likely to move to occupations that require higher-level communication skills. These
ndings suggest that immigrants and natives have skills that are complementary and that
the presence of immigrants can promote better specialization across occupations.

Contributing Disproportionately to Innovation
Since employers select the college-educated immigrants that come into the country, and
the supply of immigrants is restricted, those who get the opportunity to immigrate tend to
be more highly skilled than the average college graduate in the United States. Workers with
such specialized skills can help develop new technologies and production processes by
engaging in innovation.
A seminal 2010 paper on the relationship between immigration and innovation — written
by Jennifer Hunt of McGill University (at the time) and Marjolaine Gauthier-Loiselle of
Princeton University (at the time) — showed that at the state level, a 1 percent increase in
college-graduate immigrants increases patents per capita by 9 percent to 18 percent.2 The
patenting prowess of college-graduate immigrants can be explained almost entirely by
immigrants disproportionately holding degrees in science and engineering. Such ndings
are consistent with the data in Table 1, which show that immigrants disproportionately
work as computer scientists, engineers and college professors in high-innovation industries
such as information technology, electrical manufacturing and higher education.
More recently, economists at Stanford University exploited a novel dataset that links
individuals to patent records to quantify the contributions of immigrants to innovation in
the United States.3 (Like Hunt and Gauthier-Loiselle, they used patents as a proxy for
innovation.) First, they showed that while immigrants are only 10 percent of the U.S.
population, they account for 16 percent of all inventors (de ned as originators of patented
innovations) and 23 percent of all patents. The researchers also note that immigrants and
natives obtain patents of similar quality. They nd further evidence that immigrants are

more likely to cite patents by foreign inventors and to coauthor with inventors who reside
outside the United States. They conclude that the ability of immigrants to bring in foreign
technologies and collaborate with a more diverse group of researchers might be why
immigrants are able to obtain more patents.
To estimate the total contribution of immigrants to U.S. innovation, the Stanford
economists quantify not only the direct e ects, through the creation of patents by
immigrants, but also the indirect e ects, such as positive productivity spillovers on U.S.
inventors. For example, immigrants could expose natives to new sets of tools and
technologies. The researchers nd that, on average, terminating a research relationship
with an immigrant collaborator decreases the U.S. inventor's future patenting activity by 26
percent, while terminating a research relationship with a U.S. collaborator decreases future
patenting by 10 percent. Using these results, they estimate that immigrants contribute 37
percent of total U.S. innovation, 15 percent directly and 22 percent indirectly.

Reducing Communication and Cultural Barriers
Historically, policymakers have attempted to create jobs in their countries by designing
policies to attract economically signi cant operations of foreign-based multinational
corporations. Immigration can have a big impact on such location decisions because
immigrants have skills, such as knowledge of a foreign language or foreign cultural norms,
that facilitate communication between the parent company and the U.S. a liate. Konrad B.
Burchardi at Stockholm University, Thomas Chaney of Science Po and Tarek A. Hassan at
Boston University established this relationship in a 2019 paper using 130 years of data on
immigration to U.S. labor markets.4 They found that within a labor market, the number of
U.S. jobs available at rms headquartered in a speci c origin country increases 7 percent
when the number of individuals with ancestry from that country doubles. The main
explanation for this e ect is that immigrants facilitate communication between the a liates
in the United States and their parent companies abroad. The researchers concluded that
the e ects of immigration on foreign direct investment last a long time — even after
immigration from a speci c country to the labor market ceases — because immigrants pass
traits to their descendants, such as language skills and cultural norms, that help reduce
communication barriers.
My research also has provided consistent evidence that foreign multinationals in the United
States highly value immigration from their home countries.5 Using a novel dataset of H-1B
visas, I found that foreign companies in the United States hire immigrants from their home
countries at higher rates than domestic rms. The companies with the highest
concentrations of own-country immigrants tend to be headquartered in countries that are
farther away from the United States and whose main language is not English. These
patterns are consistent with immigrants being more valuable for being able to reduce
communication and cultural barriers.

Implications for Policy Discussions
Opponents of expanding immigration tend to argue that immigrants compete with natives
who perform similar tasks, thereby reducing employment opportunities and wages for
natives. However, empirical studies tend to nd either negligible negative e ects or positive
e ects on native wages and employment.6 In the case of college-educated immigration,
these results can be explained by the types of immigrant contributions highlighted in this
brief. First, highly skilled immigrants quite often ll jobs in growing sectors, such as
information technology and health care, by providing scarce skills that supplement and
complement those of native workers. Second, college-educated immigrants contribute
disproportionately to innovation, which helps American companies develop new products
and expand production. And third, highly skilled immigrants facilitate U.S. expansions of
multinational corporations that create jobs for both immigrants and natives.
If the e ects of college-educated immigration are overwhelmingly positive, the policy
discussion naturally shifts to nding ways to increase the in ow of top foreign talent. In a
2020 working paper, Harvard Business School professor William R. Kerr identi es two main
gatekeepers of college-educated immigrants: businesses and universities.7
Businesses help immigrants enter the country through the H-1B program and other
employment-based visa programs, but the United States caps the total number of H-1B
visas available annually for a majority of industries.8 This cap has not increased since 2004,
but every year since 2014, the total number of applications has risen to double or, in some
years, triple the number of available slots. This pattern implies that prospective immigrants
face increasing uncertainty over whether they will "win the lottery" and gain access to U.S.
labor markets. Such uncertainty might discourage some of the most talented workers from
even attempting to immigrate to the United States.
Universities try to select the most promising foreign-born students for both undergraduate
and graduate programs, and many of those students want to work in the United States
after completing their degrees. However, foreign graduates from U.S. institutions still need
to get an employment-based visa, such as an H-1B, if they intend to remain in the United
States. Hence, students could be discouraged from applying to study in the United States by
the higher uncertainty of receiving an employment visa after graduation.
Reforms designed to improve the H-1B allocation process, increase the H-1B cap and
simplify the transition of immigrant students from universities to the labor market could
have a signi cantly positive impact on U.S. productivity.
Nicolas Morales is an economist in the Research Department at the Federal Reserve Bank
of Richmond.


See Giovanni Peri and Chad Sparber, "Task Specialization, Immigration, and Wages," American
Economic Journal: Applied Economics, July 2009, vol. 1, no. 3, pp. 135–169; also, see Peri and
Sparber, "Highly-Educated Immigrants and Native Occupational Choice," Industrial Relations: A
Journal of Economy and Society, July 2011, vol. 50, no. 3, pp. 385–411.

Jennifer Hunt and Marjolaine Gauthier-Loiselle, "How Much Does Immigration Boost
Innovation?" American Economic Journal: Macroeconomics, April 2010, vol. 2, no. 2, pp. 31–56.

Shai Bernstein, Rebecca Diamond, Timothy McQuade and Beatriz Pousada, "The Contribution
of High-Skilled Immigrants to Innovation in the United States," Manuscript, July 2019.

Konrad B. Burchardi, Thomas Chaney and Tarek A. Hassan, "Migrants, Ancestors and Foreign
Investments," Review of Economic Studies, July 2019, vol. 86, no. 4, pp. 1448–1486.

Nicolas Morales, "High-Skill Migration, Multinational Companies, and the Location of Economic
Activity," Federal Reserve Bank of Richmond Working Paper No. 19-20, December 2019.

See William R. Kerr and William F. Lincoln, "The Supply Side of Innovation: H‐1B Visa Reforms
and U.S. Ethnic Invention," Journal of Labor Economics, July 2010, vol. 28, no. 3, pp. 473–508;
also, see Giovanni Peri, Kevin Shih and Chad Sparber, "STEM Workers, H-1B Visas, and
Productivity in U.S. Cities," Journal of Labor Economics, July 2015, vol. 33, no. S1, part 2, pp.

William R. Kerr, "Global Talent and U.S. Immigration Policy," Harvard Business School Working

Paper No. 20-107, April 2020.

Many nonpro t employers, such as government agencies and most colleges and universities,
are exempt from the cap.

This article may be photocopied or reprinted in its entirety. Please credit the author, source,
and the Federal Reserve Bank of Richmond and include the italicized statement below.
Views expressed in this article are those of the author and not necessarily those of the Federal
Reserve Bank of Richmond or the Federal Reserve System.

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