Yves here. Readers pooh-poohed another VoxEU post that used patents as a proxy for innovation. However, it may have been a more valid measure in the past than now.
Another issue is that this article is at odds with the thinking of other experts on innovation, who see it as coming not out of individual activity but clusters of people working together, either closely or loosely, modeled on Silicon Valley and the tech activities in the Boston area.
By Ufuk Akcigit, Assistant Professor of Economics, University of Chicago, John Grigsby, PhD Candidate in Economics, University of Chicago, and Tom Nicholas, William J. Abernathy Professor of Business Administration, Harvard Business School. Originally published at VoxEU
The impact of immigration on American economic development has become one of the most controversial issues in recent policy debates. While much of the economics literature shows the positive contribution of high-skilled immigrants to US inventive activity for recent time periods (e.g. Hunt and Gauthier-Loiselle 2010, Kerr and Lincoln 2010), there is little systematic evidence establishing their contribution over the longer run (Abramitsky and Boustan 2016). Our new study attempts to inform this debate by examining the role of immigrant inventors in the process of technological development from an historical perspective (Akcigit et al. 2017a).
The channel through which immigrant inventors can contribute to growth can be understood with reference to at least two literatures. First, endogenous growth theory assumes that innovation and technological progress are main engines of long-run economic growth (e.g. Romer 1990, Aghion and Howitt 1992). Second, a vast literature shows that human capital accumulation is a major determinant of growth (e.g. Lucas 2009, Gennaioli et al. 2012). Since high-skilled immigrant inventors bring advanced, or ‘upper-tail’ human capital (e.g. Mokyr 2002, Squicciarini and Voigtländer, 2015) to the host country, they can have a large impact on technology diffusion and productivity growth.
Historical Context and Descriptive Evidence
Our study is part of a major project linking millions of individuals from Federal Censuses between 1880 and 1940 to millions of inventors from patent records (Akcigit et al. 2017b). Since the Federal Censuses report birthplace, we can distinguish migrant inventors from those who were US born. Furthermore, the 1940 Census asked respondents how much they earned in 1939. This information permits analysis of the relative differences in labour income between immigrant inventors and their domestic-born counterparts.
Our time period includes the age of mass migration between 1850 and 1913, when almost 30 million European immigrants came to America, and years under the national origins quota system, which limited entry by immigrants between the 1920s and the mid-1960s. In our data immigrants accounted for 19.6% of all inventors between 1880 and 1940. Today, that share is about 30%.
Figure 1 shows the share of inventors who were born abroad in each state. During the late nineteenth and early twentieth centuries, economic activity was largely concentrated in parts of the Northeast and the Midwest (Glaeser 2011). Immigrant inventors were heavily concentrated in these places too, perhaps in response to the greater opportunities and rewards available to individuals with inventive capabilities. Indeed, prior work has shown that the movement of inventors across countries is affected by key economic variables that affect financial returns, such as tax policy (Akcigit et al. 2016). Meanwhile, immigrant inventors were far less represented in southern states, where opportunities, or societal openness to disruptive ideas, may have been more limited (e.g. Acemoglu et al. 2014).
Figure 1. The geographic location of immigrant inventors
Notes: Map shows the share of each states inventors who were born abroad in our six decennial census years (1880, 1900-1940). Darker colours indicate a higher immigrant share.
Based on an analysis of US patent technology classes, Figure 2 shows the areas in which immigrant inventors were prevalent. Medical inventions (e.g. surgical sutures) accounted for the largest share of immigrants, but this category produced just 1% of all US patents. However, immigrants were also active in chemicals and electricity – two sectors that had a particularly large effect on US economic growth, accounting for 13.9% and 12.6% of all US patents, respectively. Noticeably, immigrants accounted for at least 16% of patents in every area. This evidence suggests that their impact on inventive activity was widespread.
Figure 2 also shows that the majority of immigrant inventors originated from European countries, with Germans playing a particularly prominent role. This is consistent with the findings of Moser et al. (2014) who show that German-Jewish émigrés who fled the Nazi regime boosted innovation in the US chemicals industry by around 30%. Today the closest analogue to these high-impact individuals would be inventors of Indian and Chinese ethnic origin who make substantial contributions to the development of innovation clusters in areas like Silicon Valley (Hunt and Gauthier-Loiselle 2010, Kerr and Lincoln 2010).
Figure 2. The technology areas of immigrant inventors
Notes: Figure shows the share of inventors who were born abroad in our six decennial census years (1880, 1900-1940), broken down by main technology area.
Measuring the Impact of Immigrant Inventors and Assimilation Frictions
Our study attempts to measure the extent to which immigrant inventors were associated with long-run US technological development. We constructed a measure of foreign-born expertise, which multiplies the share of each country’s patents granted in a given technology area between 1880 and 1940 (as a measure of proficiency) by the number of immigrants from that country in the 1940 Census (as a measure of how intensely that proficiency diffuses to the host country).
We find that technology areas with higher levels of foreign-born expertise experienced much faster patent growth between 1940 and 2000, in terms of both quality and quantity, than otherwise equivalent technology areas. Although we do not identify a causal relationship, our quantitative evidence can be used alongside qualitative evidence to highlight two areas where immigrant inventors may have acted as catalysts to economic growth: through their own inventive activity and through externalities affecting domestic inventors.
Immigrant inventors were responsible for some of the most fundamental technologies in the history of US innovation, which still influence our lives today. For example, Nikola Tesla, who was born in Serbia, worked in America on alternating current electrical systems; the Scotsman Alexander Graham Bell was instrumental to the development of the telephone from a workshop in Boston; Swedish inventor David Lindquist, while living in Yonkers, New York, assigned his patents relating to the electric elevator to the Otis Elevator Company located in Jersey City, New Jersey; and Herman Frasch, a German-born chemist, worked in Philadelphia and Cleveland on techniques which are analogous to modern fracking.
The positive externalities of migrant inventors can be observed through their collaborations with domestic inventors. The specialised insights brought by migrant inventors most directly augmented the skills of domestic inventors through team-based production. For example, the 1940s saw James Hillier, a Canadian immigrant, develop the first commercially viable electron microscope at Radio Corporation of America alongside Ladislaus Marton, a Belgian inventor, Vladimir Zworykin, a Russian inventor, and US-born engineers. However, it is important to note that we cannot rule out that immigrant inventors may have displaced domestic born engineers. For example, Borjas and Dorn (2012) found that the arrival of Soviet mathematicians in America during the 1990s led to the marginalisation of US mathematicians.
Our study also shows that the assimilation of foreign-born inventors into the US was not frictionless. Using data on labour income from the 1940 Federal Census, we show that, despite being more productive in terms of patenting, immigrants were paid less on average than domestic inventors. There is also evidence of similar wage penalties for other potentially marginalized groups – specifically black and female inventors. These results are consistent with classic definitions of discrimination going back to the work of Arrow (1973), where differences in wage income are attributed to discrimination if they cannot be explained by differences in productivity.
Conclusion
In summary, our study – which is based on a large new data set matching millions of inventors from patent records to individuals in Federal Censuses – provides suggestive evidence that immigrant inventors were of central importance to American innovation during the 19th and 20th centuries. Although the migration of high-skilled inventors to the US involved some costs, immigrant inventors contributed heavily to new idea creation, through both their own work and collaboration with domestic inventors. Our evidence aligns with the view that growth in an economy is determined by its ablest innovators, regardless of national origin. The movement of high-skilled individuals across national borders therefore appears to have aided the development of the United States as an innovation hub.
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The USA had a consumer culture like no other. Americans still rate high on storage space and piling trash. Inventors and businessmen both need customers before an actual business exists.
I am surprised (and pleased) at the innovative contributions of Canadians to American culture, especially in the medical sphere.
Considering the population of Canada, when you consider innovative contributors per capita, that’s actually very good.
A big problem we have in Canada is that it is hard to get funding for entrepreneurs so they often have to go to the USA. We need to invest more domestically in new business development here.
Compounding the problem, Canadian corporations are super risk averse, even more so than Americans. They spend even less on employee training and capital investments. It’s a disgrace. All that matters is short term profits.
One area of innovation that doesn’t get mentioned in this type of article is the innovative cuisine that immigrants can infuse into a community. Coming from the Pennsylvania Coal Belt, I can attest that the cultural mix of Italians and Slavs who came to work the mines has infused the area with a unique culinary flavor (pun intended) that continues to this day. The proof exists in the dozens of community events that happen throughout the area; church bazaars, festivals, fairs, etc that offer up homemade pierogies, pancakes, haluski, and other ethnic entries that help define the area as a whole.
These recipes would never count as “innovations” in the way this article suggests, but they are far more impactful on the everyday lives of the residents than some new patent.
One is reminded that the immigration policy that gave the Untied States people like Einstein and Fermi and Szillard Von Braun etc. was a highly restrictive one. It wasn’t enough even to have a PhD in physics – you needed to be the BEST PhD in physics. And there was essentially no illegal immigration before about 1970.
An immigration policy that picks and chooses from amongst the best in the world could indeed be in the national interest. But conflating this with a policy of mass migration of people who have, on average, average ability, is IMHO intellectually dishonest.
Our current policy gives essentially equal priority to the most outstanding Indian biochemists, mediocre Indian biochemists, sub-par Indian biochemists, MS13 Gang members, etc. It is clearly a policy to maximize population growth at the expense of all other priorities. This has nothing to do with innovation.
Imagine that a University hired as faculty everyone who applied, without limit, and then split up the money for salaries and space for labs. Soon such a University would be unable to attract anyone with talent. I mean, did Einstein ever express a wish to move to Bangladesh?
And remember: innovation requires not just innovators. It requires resources and opportunities. A million Einsteins slowly starving to death in the mud who have only sticks and rocks to work with will not innovate you all that much…
That’s true too.
I would like something like the Canadian Points system for the US, only a lot more restrictive.
Actually Canada’s point system needs to be more restrictive too.
1. Reflection of current job market shortages
2. Ability to start a new degree
3. Only immigrate the best of each nation
4. Quality is better than quantity, be willing to withhold citizenship for failure to assimilate (example: http://www.usatoday.com/story/news/world/2016/06/28/swiss-deny-citizenship-muslim-girls-who-balked-swimming-boys/86469658/)
Yeah I think that there needs to be huge changes across the board.
How about we stop ruining other people’s homelands?
It’s not quite related to immigration, but yes less war would be desirable too (Fewer refugees too!).
The WW2 crop was special in more than one way. And, FYI, it wasn’t all Einsteins, Fermis etc. – there was a plenty of “just PhD”, or even not having a degree at all.
Not to mention that in 1850s there wasn’t anything like PhD to start with, and few European academics would consider moving to the US until after WW1. Look at Tesla, who was the classical drop-out. Or look at Ericsson, who didn’t even have any formal high education, but was one of the most influential engineering inventors of 19th century.
I have a family who moved to the US in late 1960s and has a few (real, engineering) patents to his name. While he had an engineering degree, it wasn’t recognised in the US at all, and he had to do another one in the US.
“It is clearly a policy to maximize population growth at the expense of all other priorities.”
I would go full Marxist and proclaim instead it is clearly a policy designed to swell the overcrowded ranks of the surplus labor pool. Population growth, higher birth rates, etc. all tallied as plusses for our rulers, but I think those are viewed as ancillary benefits. I believe holding down wages and regulations with a gigantic black market labor pool ( Those who immigrated without authorization or those who may have immigrated legally but lack the ability to work legally due to expired visas or student visas etc.) willing to work off the books for cash is the chief motivator of immigration policy. This belief is why it absolutely kills me when I see left-leaning groups that call themselves “Socialists” actively defending/promoting illegal immigration. I am convinced that “Sanctuary Cities” are a Capitalist ploy to screw the native born working class.
Right after the election I was walking my dog with my staunchly Democratic, Hillary Clinton supporting, immigrant, father-in-law in Los Angeles. We were on a street in his neighborhood, a nicer one, that is experiencing a housing boom. Smaller, older, sub-100k houses (at building date) from the 70’s, 80’s and 90’s are being knocked down left and right and replaced with bigger, more luxurious, developer-built homes that cost between three and five million. One particular street with four houses under construction was a chaotic beehive of activity with what seemed like a hundred or more workers, but not one person was speaking English and there wasn’t a native born white or black face to be found anywhere in the crowd. We quietly attempted to navigate the madness silently and attempted to avoid getting hit by a concrete truck or a minivan laden with coolers full of lunch tacos for the workers. “This is why Trump won” he said; summing up what we had both been thinking matter-of-factly and with sadness. It was a perfect microcosm of native born, working class, resentment and economic dysfunction. The army of black market, mostly illegal laborers, the opulence and price tag of the new housing, the do-nothing developers making millions from demolishing and rebuilding a single house, the finance industry making trillions inflating home values to the stratosphere while regular incomes stagnant or decrease. The nameless, faceless “winners” of our new economy who make enough money to buy a five million dollar home where a once affordable, working middle-class home once stood.
Spot on.
These conclusions about immigrants fueling innovation appear to be bogus. America during the 19th and 20th centuries was flooded by mass immigration, including every one of my own grandparents. World-historical conditions were unique, and nearly every field was filled with immigrants during the study period, prior to 1940.
I think that Yves hits the nail squarely on the head: innovation is spurred when clusters of people are able to come together with funding. Perhaps an over-simplification, but Silicon Valley was seeded when Xerox PARC benefitted by picking-off government-funded researchers from nearby SRI, DARPA, NASA-Ames, and from nearby Hewlett-Packard, Fairchild, Lockheed, and GE labs that were all winding-down after the moon landing. Those research clusters had benefitted from a critical mass of scientists in the area working on government-funded nuclear research at Lawrence-Berkeley, Lawrence-Livermore, and SLAC.
Right! It isn’t war which spurs innovation, as many plutocratic warmongers have falsely proclaimed, but the funding increases during times of war!
Even if you believe that some idea’s are so novel that a single person or entity can own them and you are willing to hypocritically believe this doesn’t stand true for all such ideas (calculus, reading, writing, transistors, round wheels, etc.) its still not valid to use patents as a measure of innovation. In fact they are routinely mis-administered, (see here for some examples). The patent examiners get bonuses for number of patents granted so the novel idea that might take years to generate is less than two ideas that never result in a usable product much less a safe one. Search for Radiumater, a great little device that you can use to add radiation to your water with many health benefits. That doesn’t even get into how the patent system is used to keep out small innovators and reduce competition (which again distorts its metric for innovation).
I’m no expert on the importance of recent scientific discoveries for which we have yet to find applications, but it feels like the world has been in an innovation slump since the financial crisis. It’s hard to think of new innovations since the crisis which have meaningfully improved peoples lives the way previous decades of innovation have. To illustrate this contrast, innovations from prior decades include:
1970s:
First commercially available microprocessor computer chips
Recombinant DNA (gene splicing) technology
CT ( and MRI and PET ) Medical Imaging Devices
Hand Held electronic calculators
1980s:
Home PC computers
Computer software companies
Handheld Video Cameras
Home Video Cassette Recorders
MiR Space Station
DNA Fingerprinting
1990s:
Commercial Internet
Mobile Telephones
Thin/Flat Screen Television and Video Monitors
CDs/DVDs
International Space Station
Mapping the Human Genome
Java & Linux Programming Languages
2000s – Financial Crisis:
Film-Less Digital Cameras
Touch Screen Computers and Telephones
Handheld Computers (Smartphones, iPad, iPod)
USB Flash/Thumb Storage Drives
Commercial GPS
Wireless Data Networks and Technology (cordless internet & file sharing)
Digital Vido Recorders (DVR/Tivo)
Text Messaging
Financial Crisis – Now:
???????
Immigration, new ideas, and opening up opportunities to new groups can only help this situation.
We certainly shouldn’t forget the impact immigrants have had on ethnic hat innovation. All baseball caps makes for a boring American boy! And girls, too.
https://www.bing.com/images/search?q=ethnic+hats&qpvt=ethnic+hats&qpvt=ethnic+hats&qpvt=ethnic+hats&FORM=IGRE
Most research now at universities and most STEM grads are foreign.
“About 76% of the patents at the top 10 patent-producing U.S. universities in 2011 had at least one foreign-born inventor, according to a new study by The Partnership for a New American Economy.
Foreign nationals were listed as inventors in over 84% of the IT patents and 79% of the patents for pharmaceutical drugs or drug compounds”
http://www.renewoureconomy.org/news/foreign-born-dominate-u-s-patent-holders-study/
Foreign Born Dominate U.S. Patent Holders: Study
“International students play a critical role in sustaining quality science, technology, engineering and mathematics (STEM) graduate programs at U.S. universities, a new report from the National Foundation for American Policy (NFAP) argues.
It will come as no surprise toAmerica will not be “great again” without fixing its school systems. observers of graduate education that the report documents the fact that foreign students make up the majority of enrollments in U.S. graduate programs in many STEM fields, accounting for 70.3 percent of all full-time graduate students in electrical engineering, 63.2 percent in computer science, 60.4 percent in industrial engineering, and more than 50 percent in chemical, materials and mechanical engineering, as well as in economics (a non-STEM field). However, the report, which analyzes National Science Foundation enrollment data from 2010 by field and institution, also shows that these striking averages mask even higher proportions at many individual universities. For example, there are 36 graduate programs in electrical engineering where the proportion of international students exceeds 80 percent, including seven where it exceeds 90.”
https://www.insidehighered.com/news/2013/07/12/new-report-shows-dependence-us-graduate-programs-foreign-students
Foreign Student Dependence
http://www.prb.org/Publications/Articles/2011/usforeignbornstem.aspx
More U.S. Scientists and Engineers Are Foreign-Born
https://www.washingtonpost.com/local/education/sat-scores-at-lowest-level-in-10-years-fueling-worries-about-high-schools/2015/09/02/6b73ec66-5190-11e5-9812-92d5948a40f8_story.html?utm_term=.a937b7d90d83
SAT scores at lowest level in 10 years, fueling worries about high schools
“College, in an earlier time,” Nichols writes, “was supposed to be an uncomfortable experience because growth is always a challenge,” replacing youthful simplicities with adult complexities. Today, college involves the “pampering of students as customers,” particularly by grade inflation in a context of declining academic rigor: A recent study showed “A” to be the most commonly awarded grade, 30 percent more frequent than in 1960. And a 2011 University of Chicago study found that 45 percent of students said that in the previous semester none of their courses required more than 20 pages of writing and 32 percent had no class that required more than 40 pages of reading in a week.
“Unearned praise and hollow successes,” Nichols says, “build a fragile arrogance in students that can lead them to lash out at the first teacher or employer who dispels that illusion, a habit that carries over into a resistance to believe anything inconvenient or challenging in adulthood.” A habit no doubt intensified when adults in high places speak breezily of “alternative facts.”
http://www.japantimes.co.jp/opinion/2017/01/30/commentary/world-commentary/u-s-suffers-excess-intellectual-emptiness/#.WJC8_zggGO4
U.S. suffers an excess of intellectual emptiness
I think more important than foreign STEM student dependence is the fact that majority of students in public schools are now poor. This is catastrophic for US on many levels.
Predominantly European immigrants according to your bar graph. So nothing about this has any bearing on illegal immigration and our southern border debate.
Imho this study is lacking a major variable, being the inclusion of 2nd generation and possibly 3rd generation americans. Many adult immigrants have difficulty with integration due to linguistic and cultural barriers, and de facto become hardworking shop owners or restaurateurs, which while they are a worthwhile pursuit, don’t qualify as innovation. Their children, however, tend to be academically gifted and earnest. A great percentage of Tech entrepreneurs come from that tranche.