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UC San Diego Study Suggests Hiring Immigrant Workers Leads To Greater Innovation

The Geisel Library is seen from the UC San Diego campus in this undated photo.
Milan Kovacevic
The Geisel Library is seen from the UC San Diego campus in this undated photo.

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rates of H-1B workers increased product reallocation — the ability for companies to create new products and replace outdated ones, which in turn, grows revenue," he said.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."