UCSD study suggests hiring immigrant workers leads to greater innovation

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SAN DIEGO — Hiring high-skilled foreign workers leads to greater innovation and also has positive effects on business profits, according to a study conducted by UC San Diego researchers.

The study published by the National Bureau of Economic Research comes amid new federal restrictions on the temporary H-1B visa, which allows U.S. companies to employ foreigners in specialty occupations, including engineering, biology and computer programming.

Restricting the amount of H-1B visa holders in the U.S. may not be such a good idea, according to UCSD assistant economics professor Gaurav Khanna.

“We found companies with higher rates of H-1B workers increased product reallocation — the ability for companies to create new products and replace outdated ones, which in turn, grows revenue,” he said. “This discourse could have far-reaching implications for U.S. policy, the profitability of firms, the welfare of workers and the potential for innovation in the economy as a whole.”

The study authors merged publicly available H-1B data with firm-level product information from the Nielsen Retail Scanner. They also referenced earlier studies that revealed a link between immigration flows and increased patenting.

Unlike previous studies that focused on patenting, UCSD’s research shows a clearer link between immigration and incremental product improvement, which the researchers say is an “important determinant of firm-level innovation.”

“We demonstrate that changes in a firm’s production portfolio is connected to both high-skilled immigration and profitability,” the authors said. “In addition, changes in consumer goods products affect the welfare of U.S. consumers.”

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