Immigrants and Innovation in the United States

Harriet O. Duleep, College of William and Mary
David Jaeger, College of William and Mary

What are the benefits of immigration? A small body of literature has examined a variety of benefits of immigration to the U.S.: how they affect GDP, how they affect the efficiency of the labor market, whether they are a net fiscal gain or drain, and how much they lower price levels. To our knowledge, however, no studies have examined how immigrants affect the level and character of entrepreneurial activity in the U.S. This paper examines how the presence of immigrants, apart from the entrepreneurial activity of the immigrants themselves, facilities innovation and entrepreneurial activity. If, as we hypothesize, immigrants’ ability to learn new skills and methods at a lower opportunity cost than observationally equivalent natives fosters and encourages innovation and entrepreneurship (measured by self-employment, net business formation, and patent applications), immigrants are potentially a greater benefit to the U.S. economy than previous research might suggest.