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    Eric T. Stuen, Ahmed Mushfiq Mobarak and Keith E. Maskus

    We study the contribution of doctoral students to innovation at 2,300 American science and engin-eering departments from 1973 to 1998. Macroeconomic and policy shocks in source countries thatdifferentially affect enrolments across fields and universities isolate exogenous variation in the supplyof students. Both US and international students contribute significantly to the production ofknowledge at scientific laboratories, and their contributions are statistically comparable, consistentwith an optimising department. A theoretical model of scholarships helps us to infer the productivityeffects of student quality. Visa restrictions limiting entry of high-quality students are found to beparticularly costly for academic innovation.

    This article explores whether and how domestic and foreign graduate studentscontribute to the development of knowledge in science and engineering (S&E) at USuniversities. We exploit fluctuations in the supply of foreign students stemming frommacroeconomic and policy shocks in source countries to examine the effects ofdoctoral students in specific disciplines and universities on scientific publications andcitations produced in those laboratories. We have three basic motivations for under-taking this analysis. The first is to shed light on the impact of US policy regardinginternational graduate students. Since the advent of tighter restrictions on US educa-tion visa issuance after 11 September 2001, it has been argued in the media1 and inprominent science journals2 that the ability of American universities to undertakescientific research is dependent on technically trained international graduate students.In turn, restrictive visa policies could cause . . .a crisis in research and scholarship andharm the nations innovative capacity.3 The mainstream media remains filled with

    * Corresponding author: Ahmed Mushfiq Mobarak, Yale School of Management, 135 Prospect Street, NewHaven, CT 06520, USA. Email:

    We thank the National Bureau of Economic Research (NBER) Innovation Policy and the Economy programmeand the National Science Foundation SciSIP programme for financial support, the National Science Foun-dation Division of Science Resources and Statistics for providing data on Ph.D. recipients under a licensingagreement and Rich Beaudoin, James Choy and Christine Rohde for excellent research assistance. We aregrateful to Martin Boileau, Lee Branstetter, Benjamin Jones, Fiona Scott-Morton, Stephen Redding, MarkRosenzweig, Chris Udry, the editor Rachel Griffith, anonymous referees and seminar attendees at the NBERInnovation Policy and the Economy meetings, the NBER International Trade and Investment meetings,NBER Economics of Education Meetings, NSF SciSIP Conference, American Economic Association 2011Annual Meetings, Duke University, Yale University and London School of Economics for helpful comments.

    1 Academics Warn of Crisis over Visa Curbs, Financial Times 16 May 2004 and Visas and Science: Short-Sighted, The Economist, 8 May 2004.

    2 Security Restrictions Lead Foreign Students to Snub US Universities, Nature, 15 September 2004. Seealso The Knowledge Economy: Is the United States Losing Its Competitive Edge? The Report of the TaskForce on the Future of American Innovation, 16 February 2005.

    3 Partly because of tighter limits on student visas since 2001, the number of foreign graduate students inthe US fell by 8% in 2002 and by a further 10% in 2003, reversing a 15-year trend of rapid growth. Computerscience and other S&E disciplines experienced the largest relative declines, as the US Department ofHomeland Security instituted the lengthy Visa Mantis security clearance programme. A key concern iswhether these trends presage a diminution in US leadership in science and innovation.

    TheEconomic Journal,122(December),11431176.Doi:10.1111/j.1468-0297.2012.02543.x. 2012TheAuthor(s).TheEconomicJournal2012RoyalEconomic Society. Published by Blackwell Publishing, 9600 Garsington Road, Oxford OX4 2DQ, UK and 350 Main Street, Malden, MA 02148, USA.

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  • quotes from universities and employers on the economic dangers of visa restrictions.4

    American politicians are now advocating easing immigration restrictions on scienceand maths Ph.D. students (New York Times, 28 October 2011). This debate has spread toGreat Britain where scientists, business leaders and universities have expressed graveconcern over the effects of newly proposed immigration caps and increases in foreign-student fees on UK science and innovation.5 We conduct careful analysis with microdata to shed light on these claims.

    A second objective is to contribute to the literature on the effects of skilled immig-ration. Economists have primarily focused on the effects of immigration on nativeswages (Card, 1990; Altonji and Card, 1991; Borjas, 1994, 2003; Borjas et al., 1997;Ottaviano and Peri, 2005). Wage effects estimated in this literature are mixed anddepend on whether immigrants and native workers are substitutes or complements.Cortes (2008) finds that low-skilled immigration into US cities reduces the real wages ofpoorly educated natives but raises the purchasing power of high-skilled workers bylowering the prices of non-tradables, such as housekeeping services. Hunt (2011) showsthat immigrants entering on student visas outperform natives in wages, patenting andpublishing. In the skilled-labour category, Borjas (2005) points out that doctoral stu-dent immigration has a significant adverse effect on wages of competing high-skilledUS workers.

    We extend this literature by adding innovation to the list of outcomes. The USretains a global comparative advantage in science and innovation and in creatingtechnology-driven new products and markets (Freeman, 2005). The US has the smallesttrade deficit in high-technology products and exports in this sector remained mostresilient during the 2009 financial crisis (NSF, 2011). Large imports of foreign doctoralstudents in S&E may be an important reason the US has sustained its primary positionas developer of new knowledge, even with deficiencies in mathematics and sciencetraining among American secondary school students.6

    Third, our study contributes to an understanding of university admissions and theproduction of knowledge at US universities ( Jaffe and Trajtenberg, 2002; Thursby andKemp, 2002; Thursby and Thursby, 2002; Mowery et al., 2004; Azoulay et al., 2005).Borjas (2002, 2007) notes that training foreign students involves significant costs,including tuition subsidies and enrolment congestion. One open question is whetherdomestic and international students are substitutes at the margin, as departmentsoptimise over multiple substitutable inputs. Our results are largely consistent withthis idea.

    There are clear descriptive indications that foreign students contribute to knowledgecreation and innovation. Foreign enrolments have increased in absolute and relative(to American enrolments) terms since the 1970s, and publishing and patenting have

    4 See New York Times 3 March 2009 on researchers and academic conferences moving abroad, Wall StreetJournal 11 March 2009 arguing that productive foreign-born workers create more jobs and New York Times 12April 2009 on immigration laws making it more difficult for Google to recruit workers.

    5 The Times, 8 Nobel laureates, including immigrants Geim & Novoselov, write to Times to condemnimmigration cap, accessed 12 November 2010. Prominent newspaper editorials have also warned of a braindrain to other countries: Government Cuts Will Trigger Brain Drain, The Telegraph, 1 October 2010.

    6 OECD (2006) reports that students aged 15 in the US ranked 24th in mathematics and 19th in scienceamong 29 countries. Freeman (2009) notes that the US has come to rely extensively on the immigration ofhighly educated persons to maintain a lead position in science and technology.

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    2012 The Author(s). The Economic Journal 2012 Royal Economic Society.

  • grown in lockstep. Foreign students are disproportionately more likely to earn graduatedegrees in S&E and now outnumber Americans in US engineering departments (Bell,2011). Immigrants constitute 15.6% of the American workforce but 47% of engineer-ing doctorate holders and 24.5% of patent-application authors (US Census Bureau,2009). Black and Stephans (2008) survey of articles published in Science finds that86.5% of papers have a student or post-doc author and 60% of those authors areforeign-born. The authors conclude that foreign graduate students and post-docs stafflaboratories and play lead roles in university research. Kerr and Lincoln (2008) tieincreases in employment visas to increased patenting by inventors with Indian andChinese last names. Other recent studies document that patent applications in the USare correlated with foreign-student enrolments at the aggregate national level (Chel-laraj et al., 2008) and with post-doctoral enrolments at the university level (Gurmuet al., 2010). Further, Hunt and Gauthier-Loiselle (2010) find that increases in theshare of college-educated immigrants significantly raise per capita patenting at the statelevel.

    Although the links between immigrants and innovation outcomes established in thisliterature are important, they do not by themselves allow us to gauge definitively whetherrestrictions on foreign entry would be harmful to US productivity. To answer that policy-relevant question, we need to examine whether foreign students are substitutable at themargin. One contribution of this article is the joint estimation of the effects of bothdomestic and foreign Ph.D. students at