CanSkilledImmigrationPolicyRaiseInnovation?EvidencefromtheCanadian`PointsSystem’
JoelBlit,MikalSkuterud,andJueZhang
DepartmentofEconomics
UniversityofWaterloo
December2017
Abstract
Weexaminetheeffectofchangesinskilled-immigrantpopulationsharesin98Canadiancitiesbetween
1981and2006onper capitapatents.TheCanadiancase isof interestbecause its `points system’ for
selectingimmigrantsisviewedasamodelofskilledimmigrationpolicy.Ourestimatessuggestthatthe
impactofincreasingtheshareofuniversity-educatedimmigrantsonpatentingratesissmallerthanthe
impactthatbothnative-bornshaveinCanadaandimmigrantshaveintheU.S..Themodestcontribution
ofCanadianimmigrantstoinnovationislargelyexplainedbythefactthatonlyaboutone-thirdofCanadian
STEM-educatedimmigrantsfindemploymentinSTEMjobs(relativetotwo-fifthsoftheCanadian-born
andone-halfofimmigrantsintheU.S.).Consistentwiththis,wefindalargeandsignificanteffectofSTEM-
educated immigrants when we also condition on STEM employment. Our results suggest potential
benefitsfromgivingemployersaroleintheselectionofskilledimmigrants.
Keywords:Immigration;innovation;immigrationpolicy
JELClassifications:J61,J18,O31
*WewouldliketothankDavidGreen,IsaacEhrlich,JennyHunt,BillKerr,BillLincoln,GarnettPicot,Chris
Worswick, and seminar participants at the University of Melbourne, University of British Columbia,
UniversityatBuffalo,UniversityofWaterloo,Immigration,Refugees,andCitizenshipCanada(IRCC),and
the 2015 and 2016 Canadian Economics Association Meetings for valuable comments. The authors
acknowledgefinancialsupportfromtheSocialScienceandHumanitiesResearchCouncilofCanada(SSHRC
Grant#430-2016-00143).
2
1 Introduction
Canada, and its’ `points system’ in particular, is widely seen as a model of effective skilled
immigrationpolicy;theU.K.adoptedapointssystemin2008anditisregularlypointedtoasanoptionin
ongoingU.S. immigrationreformdiscussions. Ithasbeensosuccessful inshifting themixofCanadian
immigrationtowardhighskilledimmigrants,thattheshareof immigrants inCanadaholdinguniversity
degreesmorethandoubledfrom14%in1986to29%in2006,andtheshareofthosewithSTEMdegrees
increased from 32% to 39%. Yet behind the glow of such successes lies an uncomfortable truth that
Canada’simmigrationsystemmaynotbeperformingaswellasiswidelybelieved.Inparticular,recent
studieshavefoundthat,whiletheCanadian`pointssystem’givesconsiderableweighttoforeignsources
ofeducationandworkexperience,thereisevidencethatforeignsourcesofhumancapitalaredevalued
byCanadianemployers (GreenandWorswick2012;SkuterudandSu2012)andthatnewercohortsof
immigrantsarenotfaringaswellascohortsfromtimespast(PicotandSweetman2005).Inthispaper,
weexamine the contributionsof immigrants toCanada,notbyexamining theirwages, as inprevious
studies,butbyexaminingtheextenttowhichtheyfosterinnovationinthecitiesinwhichtheysettle.We
findtheimpactofskilledimmigrantsonpatentingratestobesurprisinglysmall,bothcomparedtothe
impactofskilledCanadian-bornindividualsandtotheimpactthatskilledimmigrantshaveintheU.S..We
presentevidencesuggestingthatthisisduetoSTEM-educatedimmigrantsstrugglingtofindjobsinSTEM
andshowthatconditionalonbeingemployedinSTEM,theimpactofskilledimmigrantsonpatentingis
infactlargerthanthatofskilledCanadian-bornindividuals(althoughthedifferenceisnotsignificant).
Determiningwhetherimmigrantsgeneratepositiveeconomicbenefitsisbecomingincreasingly
important.Sincetheeconomicturmoilbroughtaboutbythefinancialcrisisof2008voters’supportof
immigrationhasdecreased.Thisdevelopment,whichhasbeenparticularlyevident intheU.S.andthe
U.K., has put increasing pressure on pro-immigration politicians to justify the economic benefits of
continuedlarge-scaleimmigration.Todoso,increasingreferencehasbeenmadeinpolicydiscussionsto
theburgeoningeconomicsliteratureexploringthe`wider’benefitsofimmigration,includingeffectson
internationaltradeflows,entrepreneurship,and,perhapsmostsignificantly,giventhegrowingconsensus
of its importance to long-term economic growth, on innovation. Although the precise theoretical
mechanismsthroughwhichdiversityincreasesinnovationarelesswelldeveloped,theempiricalliterature
3
provides remarkably consistent evidence of the productivity-enhancing benefits of increasing ethnic
diversitywithinworkplaces,cities,andcountries.1
Forgovernmentpolicymakersresponsibleforimmigration,thecriticalquestionishowtoharness
thisgrowth-enhancingpotentialofethnicdiversity.Inthisrespect,theeconomicsliteraturelinkingskilled
immigration with higher patenting rates is arguably not only the most relevant, but also the most
compelling.BeginningwithU.S.studiesbyPeri(2007),Chellaraj,Maskus,andMattoo(2008),Huntand
Gauthier-Loiselle (2010), and Kerr and Lincoln (2010), but now also including a number of European
studies(Bosetti,Cattaneo,andVerdolini(2012);Ozgen,Nijkamp,andPoot(2012),Parrotta,Pozzoli,and
Pytlikova(2014),Nathan(2014a)),thisliteraturehasattractedconsiderableattentioninthepolicyworld.
The results from these studies consistently suggest that increasing skilled immigration, particularly of
immigrantseducatedinscience,technology,engineering,andmathematics(STEM)fields,hasasignificant
positive impacton thenumbersofpatents that are created. For example,Hunt andGauthier-Loiselle
(2010) findthataonepercentage-point increase in theshareofastate’spopulationwhoarecollege-
educatedimmigrantscanbeexpectedtoincreasestate-levelpatentspercapitaby9-18%.Comparingthe
magnitudeofthiseffecttowhatisimpliedbythedifferentialpatentingrateofimmigrantsobservedin
individual-leveldata,theyconcludethatanimportantpartofthiseffectreflectsapositiveexternalityof
immigrants on the patenting rates of native-born Americans. The potential of immigrants to raise
innovationlevelsnotonlydirectlythroughtheirownpatents,butalsobymakingnativesmoreinnovative,
makesastrongeconomiccaseforimmigration.
In this paper, we examine the Canadian case in order to inform the innovation-enhancing
potentialofimmigrationinasettinginwhicha`pointssystem’isusedtoscreenskilledimmigrants.The
CanadiancaseisalsoimportantbecauseCanadaconsistentlyranksamongtheworld’slargestimmigrant-
receivingcountriesmeasuredasaproportionofitspopulation.Betweenthemid-1980sandmid-1990s,
bothCanada’sannualinflowofnewpermanentresidentsandtheshareoftheinflowadmittedunderthe
`points system’more thandoubled.Consequently, the shareof theCanadianworking-agepopulation
comprisedofuniversity-educatedimmigrantsincreasedfrom2.1%intheearly1980sto3.3%intheearly
1990sand6.4%bythemid-2000s.GivenCanada’ssuccessatattractingskilledimmigrants,thereisthe
potential for exceptionally largeeffectsof immigrationon innovation in theCanadian case.However,
1Thenotionof`widereffects’ofimmigrationisduetoNathan(2014b).Theliteraturelinkingethnicdiversityand
innovationisinterdisciplinarywithpapersinpsychology(VanKnippenberg,DeDreu,andHoman2004),sociology
(Herring2009),managementstudies(ElyandThomas2001;Richard,McMillan,Chadwick,andDwyer2003),and
economics.
4
thereisalsosubstantialevidencepointingtosignificantlabourmarketchallengesofCanadianuniversity-
educatedimmigrants,whichsuggestthatthelabourmarketskillsofCanadianimmigrantshavenotkept
pacewiththelargeincreaseintheireducationlevels(ClarkeandSkuterud2013,2016;Clark,Ferrer,and
Skuterud2017).ItisanopenquestionwhetherthepoorearningsperformanceofCanadianimmigrants,
possiblyresultingfromthecrudenessofthecriteriausedbythe`pointssystem’toscreenhumancapital,
ismirroredintheircontributionstoinnovation.
Theprimarychallenge inexamining theCanadiancase is its relatively smallpopulation,which
limits thenumberofcitieswithasignificantnumberof immigrantsandpatents.Nonetheless, relating
changesinuniversity-educatedimmigrantshareswithinthe98largestCanadiancitiesbetween1981and
2006tochangesinpatentingrates,weobtainestimatesthatareunambiguouslysmallerthanthosefound
byHuntandGauthier-Loiselle(2010)(hereafterHGL)usingU.S.data.Thisremainstrueevenwhenwe
restrictattentiontouniversity-educatedimmigrantswhowereeducated inaSTEMfield.Ontheother
hand,theestimatedeffectofCanadian-bornuniversitygraduatesonpatentingratesisvirtuallyidentical
inmagnitudetotheHGLestimateforU.S.natives,suggestingthatthesmallermagnitudeofourimmigrant
estimatesdoesnotreflectgreatermeasurementerrorinourdataorsomethingintrinsictotheCanadian
economy or innovation sectors.Overall, our analysis suggests that increasing the university-educated
immigrantpopulationshareinCanadamayhavecontributedtoraisingpatentingrates,butonlymodestly,
andanyspillovereffectsofimmigrantsonnativepatentingarelikelyminimal.
AnimportantpolicyquestionistowhatextenttheweakercontributionofCanadianimmigrants
toinnovationthatweidentifyisrelatedtothebroaderlabourmarketchallengesofCanadianimmigrants
identifiedelsewhere. Indeed,whenwe isolate theeffectofuniversity-educated immigrantswhowere
educatedinaSTEMfieldandarecurrentlyemployedinaSTEMoccupation,ourestimatesbecomemuch
largerandstatisticallysignificant.TherelativelysmallCanadianestimatesthereforeappearto, in large
part,reflecttherelativelylowemploymentratesofCanadianimmigrantsinSTEMjobs,includingamong
thoseeducatedinSTEMfields.WhileweprovidenodirectevidenceonwhyCanadianSTEM-educated
immigrantsfacegreateremploymentbarriersthantheirU.S.counterparts,thedifferenceisconsistent
withU.S.immigrantsbeingrelativelypositivelyselectedowingtoagreaterroleofemployersinimmigrant
selectionandhighereconomicreturnstoskillinU.S.labourmarkets.
The remainder of the paper is organized as follows. In the following section, we discuss the
relevanceoftheCanadiancontext.Insection3,wedescribeourmethodologicalapproach,includingthe
5
datathatweemploy.InSection4wediscussourresultsindetail.Inthefinalsection,wesummarizeour
mainfindingsanddiscusstheirpolicyrelevance.
2 TheCanadiancontext
TheCanadianImmigrationActof1962endedthehistoricalpracticeofselectingimmigrantsonthebasis
oftheircountryoforiginandreplaceditoverthefollowingdecadewitha pointssystem’thatemphasized
the human capital of migrants. The success of the Canadian `points system’ in raising the average
educationlevelsofitsimmigrantpopulationhasledanumberofcountries,includingAustraliaandthe
U.K.,tofollowitsapproach,andhasreceivedmuchattentioninrecentimmigrationreformdiscussionsin
theUnitedStates.ThekeyrationaleunderlyingtheCanadianapproachisthathumancapitalisastronger
predictor of long-run economic success than the extent towhich an immigrant’s skillsmatch current
labourmarketneeds.Moreover,currentlocallabourmarketneedsaredifficulttoidentifyempiricallyand,
areoftenshort-lived,and theapproach is inpractice impractical, since immigrantsare free tochoose
wheretheysettle.However,withinCanadatherehasbeengrowingcriticismofthisapproachinresponse
toevidenceofadeteriorationintheabilityofCanada’sskilledimmigrantstoobtainjobscommensurate
with their levels of education and experienceobtained abroad (seePicot and Sweetman (2012) for a
reviewofthisliterature).2
ThelevelofinnovationinCanadahashistoricallybeenlowerthanthatoftheUnitedStates.The
economyinvestsasmallerfractionofGDPonresearchanddevelopment(2.0%inCanadaversus2.5%in
theU.S.in2006)andgeneratesfewerpatentspercapita(19.9patentsper100,000inCanadaversus48.0
patentsper100,000intheU.S. in2006).Prevailingexplanationsforthisgapincludedifferencesinthe
industrialmix(inparticular,Canada’shistoricalrelianceonnaturalresources),ahigherdegreeofforeign
ownershipinCanada,andtherelativelysmallersizeofCanadianfirms.However,thetwocountriesdonot
differinthefractionoftheirworkforcesemployedinSTEM.AsreportedbyBecksteadandGellatly(2006),
theshareofemploymentinscience,engineering,andrelatedoccupationswas,forCanadaandtheU.S.
respectively,9.8%and9.6%in1981/80,11.7%and11.3%in1991/90,and13.6%forbothin2001/00.
2ThishasledtheCanadiangovernmenttomakesignificantpolicyshiftsinrecentyearstowardsgivingemployersa
greaterroleinimmigrantselection.Inparticular,asufficientconditionforobtaininganinvitationforpermanent
residencyunderthenewExpressEntrysystemforprocessingapplications,introducedinJanuary2015,isajob
offerfromaCanadianemployer.Joboffersforforeignworkersmust,however,clearalabourmarkettestintended
toensurethattheemployerwasunabletofillthejobdomestically.
6
Given the lower level of patenting activity in Canada,wemight expect lower patenting rates
amongCanadianskilledimmigrantsandthattheygeneratelesspatentingspilloversonnatives.However,
thefocusofouranalysisiswhetherCanada’s pointssystem’forscreeningskilledimmigrants,inparticular
onthebasisoftheireducationalattainmentlevels,hasresultedinCanadianimmigrationhavingalarger
proportionalimpactonpatentingrates.Toprovidesomeinitialsenseofthemagnitudesofthesechanges,
inFigure1weplotbothnational-levelpatentspercapitainCanadaandtheU.S.between1980and2006
andthesharesoftheirpopulationsaged25andovercomprisedofuniversity-educatedimmigrants. In
bothcountries,theuniversity-educatedimmigrantshare increasedconsistentlyovertheentireperiod.
GiventheCanadiansystem’semphasisonskilledimmigration,theCanadiansharein1980wasmorethan
twicetheU.S.share(2%comparedto0.7%).Overthefollowing25years,Canadacontinuedtoattract
moreskilledimmigrantsasafractionofitspopulation,sothatbythemid-2000snearly6.4%ofitsworking-
ageCanadianpopulationwereuniversity-educatedimmigrants,comparedto4.2%intheUnitedStates.
GiventheevidenceinHGL,thisincreaseshouldhaveservedtoraisepatentingratesproportionally
moreinCanadathanintheUnitedStates.Interestingly,theCanadianpatentingratedid,infact,increase
moreoverthisperiodthantheU.S.rate.3Whereaspatentspercapita(x100,000)nearlytripledinCanada
(fromabout6.9in1980to19.9in2006),theyonlydoubledintheU.S.(25.9in1980to48.0in2006).Of
course,theincreaseinpatentingratesimpliedbyeventheupperboundestimateofHGL(an18logpoint
increaseinpatentspercapitafroma1percentage-pointincreaseintheuniversity-educatedimmigrant
share)aremuchsmallerthanthelogpointincreasesthateitherCanadaortheU.S.actuallyexperienced.
Ofcourse,therearemanyotherfactorsservingtoraisepatentingratesbesidesimmigration.Moreover,
thesenational-levelcorrelationscouldbeentirelymisleading.Toplausiblyidentifythecausalimpactof
Canada’sskilledimmigrationonitspatentingrate,weneedastrategytoisolateasourceofincreasesin
skilledimmigrantpopulationsharesthatareplausiblyindependentof increasesinpatentingratesthat
wouldhaveoccurredevenintheabsenceofanychangesinskilledimmigrantpopulationshares.
3Bothcountriesexhibitupwardtrendingpatentingratesuptothedot-combubbleburstingin2001.FortheU.S.,in
particular,thisincreasewasfollowedbyalargedecline,whichmayhavebeendue,inpart,toadropinthesuccess
rateofpatentapplicationsattheUSPTO,particularlyinthe“drugsandmedicalinstruments”and“computersand
communications”fields(Carley,Hedge,andMarco2003).Itisimportanttonotethat,becausewehavecollected
patentsgranteduptoNovember2014,andthatamongpatentsgrantedin2013only1.8%ofthemtook8yearsor
longertobegrantedfromthedateofapplication(whichweuseinthefigure),datatruncationlikelyexplainsonlya
smallfractionofthisdecrease.
7
3 Methodology
WecompareourresultstothoseofHGLforthreereasons.First,theirresultsarethemostgeneral,
as theyare focusedoncollege-educatedshares in theoverallpopulation,asopposed to international
studentsorH-1Bvisaholders.Thismakesitpossibletoconductmoredirectcomparisons.Second,HGL
has attracted the most interest.4 Third, they find evidence of large direct and spillover effects of
immigrants on U.S. patenting rates.5 However, rather than examine state-level (or province-level)
immigrationshares,asHGLdo,werelateimmigrantsharestopatentratesatthecitylevel.6Specifically,
weconstructa1981-2006balancedpanelofCanadianCensusMetropolitanandAgglomerationAreas
(CMA/CAs)withobservationsonskilledimmigrantpopulationsharesin98citiesevery5years.7Ourcities
rangeinpopulation(age15-70)in2006fromalowof8,448toahighof3,684,821,with66citiesabove
25,000individuals,46above50,000,26above100,000,and7above500,000.
Weestimatetheskilledimmigrantsharesofthepopulationusingthemasterfilesofthe1981,
1986, 1991, 1996, 2001, and 2006 Canadian Censuses, which provide 20% random samples of the
Canadianpopulation.Skilledimmigrantsaredefinedinfouralternativeways:(i)university-educated;(ii)
university-educatedinaSTEMfield;(iii)university-educatedandemployedinaSTEMoccupation;or(iv)
university-educatedinaSTEMfieldandemployedinaSTEMoccupation.Theappendixprovidesdetails
on howwedefine STEM fields of study andoccupations in the various Census years. In addition,we
distinguishbetweenSTEM-educatedimmigrantswithCanadianandforeigndegrees,whichweestimate
usinginformationonyearsofschoolingandageatimmigration.8Incaseswherethepopulationshares
aredefinedusingfieldofstudy,welosethefirstyearofdatainourpanelbecausefieldofstudywasnot
identifiedinthe1981Census.
4CitationcountsforHGLinGoogleScholarare417and56inWebofScienceasofMay2016.Incomparison,the
secondmostcitedpaper,KerrandLincoln(2010),has291and48citations,respectively.5KerrandLincoln(2010)donotfindstrongevidenceofspillovereffects.
6Withonly10Canadianprovinces,twoofwhichaccountforroughly60%ofthenationalpopulation,ananalysisat
theprovincelevelisnotviable.7ACMAisdefinedasoneormoreadjacentmunicipalitiescenteredonapopulationcorewithatleast100,000.ACA
musthaveacorepopulationofatleast10,000.8Specifically,weassumeschoolingisstrictlycontinuous,sothatyearsofschoolingplus6identifiestheageof
schoolcompletion.Comparingthisagetotheageatimmigrationidentifieswhethertheterminaldegreewas
obtainedinCanadaorabroad.Theresultingvariablecontainssomemeasurementerrorwhereschoolingisnot
continuousandwhereinternationalstudentsobtainCanadianschoolingpriortolanding.SkuterudandSu(2012)
showthattheconsequencesofthismeasurementerrorarenegligibleinestimatingearningstoforeignand
Canadianschooling.
8
Skilled immigrant population shares in Census years are related to the number of patent
applications(percapita)withincitiesoverthefollowing5years.Thefive-yearlagisnotonlyconvenient
for maximizing our sample size using the quinquennial Canadian Censuses, but is also justified by a
separate analysis we conducted suggesting that the impact of changes in the composition of the
populationonpatentapplicationcountspeaksfouryearsafterthechange.9Weconstructpatentcounts
atthelevelofthecityandyearusingUnitedStatesPatentandTrademarkOffice(USPTO)dataonpatents
grantedtoinventorsresidinginCanada.Alternatively,wecouldhaveexaminedpatentsgrantedbythe
CanadianIntellectualPropertyOffice(CIPO)toCanadianinventors.However,thiswouldhaveresultedin
usobservingonlyasmallsubsetofpatentedCanadianinventions,sinceCanadianinventorstendtopatent
intheU.S.andforegopatentinginCanadaaltogether,duetothemuchlargersizeoftheU.S.market.10
PatentsareassignedtocitiesbylinkingtheaddressofinventorstoCanadianCMA/CAs.Where
patents containedmultiple inventors, we assigned fractions of patents to cities, so that each patent
receivedequalweight.Forexample,apatentwithtwoinventorsfromTorontoandonefromKitchener-
Waterlooiscountedastwo-thirdsofapatentforTorontoandone-thirdforKitchener-Waterloo.Patents
areassignedayearbasedontheapplicationdateofthepatent(notthegrantdate),sincethiscoincides
mostcloselytotheactualdatethattheinnovationtookplace.Becauseweonlyobservepatentsgranted
uptoNovember2014,ourpatentcountsforthefive-yearwindowfollowing2006(theyears2007-2011)
will be lower due to data truncation.However, among patents granted in 2013,we find that 58%of
patentsweregrantedwithin3yearsofapplication,75%within4years,86%within5years,93%within6
years,and96%within7years.Ourestimatedpatentcountswill,therefore,beroughly18%lowerinthis
windowthantheyshould,butthisvariationshouldbeabsorbedinthe2006yearfixedeffect.
Ourbaselineempiricalmodelestimatesaspecificationascloseaspossibletothefirst-difference
(FD)weightedleastsquares(WLS)specificationofHGL.Wethenextendthisspecification,byincludinga
richer set of controls intended to address the possible endogeneity of within-city changes in skilled
immigrantpopulationshares.Specifically,weestimatetheequation:
9Werelatedchangesinacity’spopulationfromagivenethnicitywithchangesinthenumberoffuturepatent
applicationsbymembersofthatethnicityresidinginthatcity.WethankBillKerrforgenerouslyprovidinguswith
dataonthepredictedethnicityofpatentinventorsbasedontheirnames(seeKerrandLincoln2010).10WeconductedaseparatesearchonthewebsitesoftheCIPOandtheUSPTOforpatentsfiledintheyear2000
withatleastoneCanadianinventorandfound1,136CIPOand5,195USPTOpatentsmeetingthecriteria.To
furthertestthepremisethatCIPOpatentsarelargelyasubsetofUSPTOpatents,wemanuallysearchedtheUSPTO
databaseforthefirst100Canadian-inventorCIPOpatentsappliedforin2000andfound93unambiguousUSPTO
matchesand2additionalprobableones.Thesedataareavailablefromtheauthorsuponrequest.
9
5
1
( )( ) ( )
log( ) ( ) ( )
( ) (1981) ( ) ( )
cj c c
m nc c c
c c c
patents t jsm t sn t
pop t pop t pop t
X t Z y t t
b b
q ed
=
æ ö+ç ÷ æ ö æ öç ÷D = D + D +ç ÷ ç ÷ç ÷ è ø è øç ÷è ø
D + + +
å (1)
wherepatentsc(t+j)isthetotalnumberofpatentsgrantedtoinventorsresidingincitycthatwerefiledin
yeart+j;popc(t)isthepopulationaged15andover;smc(t)and snc(t) arethenumberofskilledimmigrants
andnatives(age15andover),respectively;Xc(t)isavectoroftime-varyingcontrolvariables;Zc(1981) is
avectorofcontrolsmeasuredin1981,intendedtocapturetheinfluenceofinitialconditions;y(t)isaset
ofCensusyearfixedeffects;εc(t)isarandomerrorpotentiallycorrelatedacrossyearswithincities;andΔ
is the first-difference between Census years. The parameter βm identifies the proportional effect of
increasingtheskilledimmigrantpopulationsharebyonepercentagepointonpatentspercapita,both
directlyandthroughpossiblespilloversonthepatentsofnatives.
FollowingHGL,webeginbyestimatingequation(1)includinglogmeanageinXc(t)andbothlog
mean income and log population in Zc(1981). We then extend the model by adding to Xc(t): (i) the
employmentrateand(ii)theexpectednumberoflogpatentspercapitabasedonthedistributionofa
city’spatentsbetween1972-1980acrosspatentclassesandthenational-levelnumberofpatentswithin
thosepatentclassesacrossCensusyears.This lattercontrolvariable,whichweborrowfromKerrand
Lincoln(2010), is intendedtocapturespuriouscorrelationsbetweenhistoricalsectoraldistributionsof
innovationacrosscitiesandsubsequentimmigrationflows.Intheextendedversionofthemodel,wealso
include a set of region-year fixed effects,where regions include theMaritimes,Quebec,Ontario, the
Prairies,andBritishColumbia.Finally,weallowthelogmeanincomecontrolvariabletovaryacrossCensus
years.Giventheconsiderablevariationincitysizesinoursampleof98Canadiancities,thevarianceof
the error term across city observations will vary considerably. To improve the efficiency of the FD
estimatorwethereforeweightalltheregressionsbycitypopulationsize.11
11Specifically,weweightthefirst-differencedobservationsby(popc(t+1)-1+popc(t)-1)-1.AconcernwiththeWLS
approachistheinfluenceofTorontoontheestimates,givenitsrelativelylargepopulation.Thisisalsoaconcernin
theIVestimationdescribedbelow,inwhichtheinstrumentsarebasedonhistoricaldistributionsofimmigrants
acrosscities.ToassureourselvesthatourfindingsarenotdrivenbytheTorontoobservationalone,wehavealso
estimatedallourmodelsexcludingToronto.AlthoughthesenaïveFD-WLSestimatesdosuggestsomewhatlarger
beneficialimpactsofuniversityeducatedimmigration,thesearestillunambiguouslysmallerthanthoseinHGL(see
10
Itis,ofcourse,possibletoestimateequation(1)usingafixed-effects(FE)estimatorinstead.With
more than two time periods, the FE estimator produces different estimates than the FD estimator,
althoughbothestimatorsareconsistentunderthestrictexogeneityassumptionthattheright-hand-side
variables in equation (1) are uncorrelated with εc(t) across all Census years. Obtaining substantially
differentpointestimatesusingFE,thatisnotduetosamplingerror,providesevidenceagainstthestrict
exogeneityassumption.WehaveestimatedallthespecificationswereportusingaFEestimatorandnone
ofourmainfindingsaresubstantivelyaltered.
Thekeychallengeinidentifyingthecausalimpactofimmigrationonpatentsusinganarea-level
analysis is that we would expect skilled migration flows to be higher to cities that are experiencing
relativelylargeincreasesininnovationactivityforreasonsthatareentirelyindependentofimmigration.
Forexample,skilledimmigrationintheU.S.isdriveninlargepartbytherecruitingactivitiesofemployers,
throughtheH-1Bvisaprogram.Ifunobservedtechnologyshockssimultaneouslyleadtoincreasesinboth
patentsandthedemandforH-1Bworkers,theestimatesofβmwilltendtobeupwardbiasedestimates
ofthecausalimpactofimmigrants.Employerlabourdemandhas,however,historicallyplayedlittlerole
intheCanadian`pointssystem’,whichisusedtoscreenthevastmajorityofeconomicclassapplicants.
Moreover,thesystemhashistoricallybeencharacterizedbysignificantprocessingbottlenecks,makingit
arguablylesslikelythatsupply-drivenchangesinimmigrationflowstoCanadiancitiesarecorrelatedwith
latentcity-levelchangesinpatentingactivity.Nonetheless,eveninCanada,immigrantsultimatelydecide
in which city they will reside. To the extent that skilled immigrants choose to settle in cities where
increasesinpatentingratesarealreadyhappening,thereisstillreasontobeconcernedthattheresults
fromthenaïveestimatesofequation(1)areupwardbiased.
Acommonsolutiontothisinferenceproblem,initiallyproposedbyCard(2001),istoisolatethe
supply-pushcomponentofimmigrationflowstoaparticularcityusingattributesofcitiesthatareplausibly
unrelated to latent innovation trends.Thestandardapproach,whichwe follow, is to instrument local
skilled immigrantpopulationsusingpredicted immigrantpopulationsbasedon thehistorical city-level
settlement patterns of immigrants from particular origin countries and national-level populations of
immigrantsfromthosecountries.Thatis,weinstrumenttheskilledimmigrantsharesmc(t)inequation(1)
usingtheconstructedvariable:
TableA1intheappendix),andourIVestimatesarealmostidenticaltothosereportedinTable5.Alternatively,we
havealsoestimatedunweightedregressionsforthelargest53cities(thosewithapopulationofatleast40,000in
1981).Theestimatesarealsolarger(seetableA2intheappendix)butstillsignificantlysmallerthanthoseinHGL.
11
(1976( ) ( ))c cj jj
sm t sm tl=å (2)
whereλcj(1976)istheshareof1976Canadianimmigrantsbornincountryjlivingincitycandsmj(t)isthe
national-level population of skilled immigrants from country j living in Canada in year t.12 Using first-
differencesoftheskilledimmigrantshares,theintuitionbehindtheinstrumentalvariables(IV)strategyis
that, for example, if the increase in the skilled immigrant population originating from Germany is
exceptionallyhighatthenationallevelbetweentwoCensusyears,wewouldexpectthecityofKitchener-
Waterloo(KW)toreceiveadisproportionatelylargeshareofthisincrease,notbecausetheseimmigrants
wereattractedby theexpectationofheightened innovativeactivity inKW,butbecause thehistorical
populationofGermanmigrantsresidinginKWandtheassociatedculturalamenitiestheyofferattracts
them.
4 Results
4.1DescriptiveFindings
Beforeexaminingtheresultsofourregressionanalysis,wereportinTable1samplemeansofthevariables
usedintheregressionsseparatelybyCensusyear.Themeansareweightedbycitypopulations,sothat
theyarerepresentativeoftheCanadianpopulationresidingwithinoneofCanada’slargest98cities.Note
that thepatent rates inTable1are roughly five times larger than those inFigure1because theyare
cumulativesumsofpatentsinthe5yearsfollowingtheCensusyear(thedependentvariableinequation
1).Consistentwiththenational-levelCanadianpatentingrateinFigure1,thefirstrowofTable1indicates
thataveragepatentingratesinCanada’scitiesincreasedconsistentlybetweentheearly1980sand2000s,
resultinginanearthreefoldincrease.Thequestionis,towhatextentdidskilledimmigrationcontribute
tothisincrease?
12Toobtain1976immigrantcitypopulationsbyorigincountryweusedmobilityinformationinthepreviousfive
yearscontainedinthe1981Census,butrestrictedthesampletoimmigrantswholandedin1976orearlier.Wedid
not,however,restrictthesampletoskilledimmigrants,sinceculturalamenitiesthatattractimmigrantsarelikely
tobesharedacrosseducationgroups.Wealsogroupedcountriesintoregionswithsharedcultures,inorderto
reducemeasurementerrorintheestimatesofλcj(1976).ThegroupsaretheCaribbeanandBermuda(Frenchand
non-Frenchareseparategroups),CentralAmerica,SouthAmerica(Frenchandnon-French),Germany,France,
WesternEurope(excludingGermanyandFrance),EasternEurope,Scandinavia,SouthernEurope,Australia/New
Zealand/U.K.andcolonies,Sub-SaharanAfrica(Frenchandnon-French),otherAfrica(Frenchandnon-French),
Oceania(Frenchandnon-French),WesternAsiaandMiddleEast,India/Bangladesh/Pakistan,China/Hong-
Kong/Taiwan,Singapore/Malaysia/Indonesia,Korea,SouthAsia(excludingIndia,Pakistan,andBangladesh),and
restoftheworld.
12
InthefollowingrowsofTable1,wereportskilledpopulationsharesseparatelyforimmigrants
andnatives.TheoverallimmigrantsharewithinCanada’slargestcitiesincreasedby4.6percentagepoints
between 1981 and 2006, which is larger than the change in the national-level share, reflecting the
increasing concentrationof new immigrants inCanada’s three largest cities – Toronto,Montreal, and
Vancouver. More important, all of this increase appears to be accounted for by university-educated
immigrants,astheirsharealoneincreasedby5percentagepoints(from2.7%to7.6%).Giventhatthe
Canadian `points system’hasneverdiscriminatedon thebasisof fieldof study, it ispossible that this
increase isaccountedforprimarilyby immigrantswhowereeducatedandemployed insectorswhere
patentingactivityisrare.Inthatcase,theireffectonpatentratesmayhavebeenmuchsmallerthanthe
HGL estimateswould predict. However, not only did the STEM-university-educated share increase by
about2percentagepointsbetween1986and2006,accountingforclosetohalfoftheoverallincreasein
the university-educated share, but by the early 2000s the share of university-educated Canadian
immigrantswhowere educated in a STEM field exceeded the comparable share forU.S. immigrants.
DefiningSTEMfieldsofstudysimilarlyusingtheU.S.NationalSurveyofCollegeGraduates(NSCG),33.6%
ofU.S.college-educatedimmigrantsin2003wereeducatedinaSTEMfield,comparedto37.4%and38.7%
ofCanadianuniversity-educatedimmigrantsin2001and2006,respectively.TheCanadian`pointssystem’
appears, therefore, to have been successful in not only raising the education levels of Canada’s
immigrants,butalsoinselectingimmigrantseducatedinSTEMfields.
Nonetheless, the Canadian research on the labour market performance of new immigrants
revealssignificantjob-educationmismatch.Foreign-trainedengineersdrivingtaxisismorethanacliché
inCanada(Xu2012).Giventhatthevastmajorityofpatentinghappensthroughcorporateresearchand
developmentactivities,challengesofSTEM-educatedimmigrantsinobtainingjobsinSTEMoccupations
mayhavelimitedtheimpactofSTEM-educatedimmigrantsonCanadianpatenting.Thereis,infact,some
evidence of this possibility in Table 1, as the population share comprised of university-educated
immigrantsfromSTEMfields increasedby2percentagepointsbetween1986and2006,buttheshare
alsoemployedinaSTEMoccupationincreasedbylessthan1percentagepoint.
InTable2,weexaminethiseducation-jobmismatchmoreclosely.13Canadianimmigrantsarenot
onlymorelikelytoholdauniversitydegreethantheirnative-borncounterparts,butthisadvantagehas
13Whilenotpresentedhere,wealsoexaminedthedeterminantsofmismatchinamoreformalregressionatthe
leveloftheindividualfor2006(withthesamplerestrictedtoindividualswithaSTEMeducation).Ourmodel
13
grownsignificantlyover time.Moreover,university-educated immigrants inCanadahavealwaysbeen
morelikelytobeeducatedinaSTEMfieldthantheirnative-borncounterpartsandthisdifferencehasalso
becomelargerovertime.By2006,nearly4-in-10university-educatedCanadianimmigrantsweretrained
inaSTEMfield, compared to2-in-10natives.However, theprobabilityofaSTEM-university-educated
immigrant being employed in a STEM occupation has tended to decrease over time, whereas it has
increased fornatives.Consequently,by2006 therewasanearly5percentagepointgap in theSTEM-
employmentrateofCanadianSTEM-educatedimmigrantsrelativetonatives(0.32forimmigrants,relative
to 0.37 for natives). In comparison, data from the NSCG indicate that one-half of STEM-educated
immigrants in the U.S. were employed in STEM jobs in both 1993 and 2003. The large gap between
immigrantstoCanadaandtheU.S.isinstarkcontrasttothesimilarrateforCanadianandU.S.natives
(around0.4forboth).14
A possible explanation for the low STEM-employment rates of STEM-educated Canadian
immigrantsisthatforeignsourcesofeducation,whichtheCanadian`pointssystem’valueshighly,may
resultinbarrierstoemployment,perhapsbecausethequalityofschoolingisloweronaverageorbecause
employers have more difficulty evaluating foreign credentials. Distinguishing between immigrants
educatedinCanadianandforeignuniversitiesprovidessomelimitedsupportforthispossibility.Rows6
and 7 of Table 2 show that the probability of being employed in a STEM job among STEM-educated
immigrantswithCanadiandegreeshasconsistentlybeenabout3percentagepointshigherthanforSTEM-
educatedimmigrantswithforeigndegrees(theonlyexceptionbeingtheendofthedotcombubblein
2001,whentherateswereidentical).However,theimpactofthisemploymentgaphasbecomemagnified
astheshareofSTEM-university-educatedimmigrantswhograduatedfromaforeignuniversityincreased
fromabout50% in1986to57% in2006,presumablyreflectingthegrowing importanceof the `points
system’inimmigrantselection.Onceagain,wewouldexpectthistrendtohavelimitedthepotentialfor
Canadianskilledimmigrationtoraisepatentrates.
includedabroadsetofexplanatoryvariablesincludingeducationalattainment,fieldofSTEMeducation,andof
coursewhethertheindividualinquestionwasanimmigrantandwheretheyobtainedtheirhighestdegree,in
additiontocontrolssuchasage,sex,andcityfixedeffects.OurfindingsshowthesamegapsinSTEMemployment
forimmigrants,andespeciallyforimmigrantsthatwereeducatedabroad.14AlthoughthefieldofstudyandoccupationclassificationsystemsinourCensusdataandtheNSCGaredifferent,
thefactthattheestimatedSTEM-employment-rateofSTEM-educatednativesaresimilarsuggeststousthatthe
muchloweremploymentrateofCanadianSTEM-educatedimmigrantsisnotbeingdriveninhowSTEMfieldsand
occupationsarebeingclassifiedinthetwodatasourcesorbyadifferentindustrialmixacrossthetwocountries.
14
PerhapsmostconcerningisthattheSTEMimmigranteducation-jobmismatchappearstobemost
prevalentamongengineeringgraduates,agroupthatcontributesdisproportionatelytopatentingactivity.
Forourmostrecentyearofanalysis(2006),wefindthatonly20.1%of immigrantuniversity-educated
engineeringgraduateswereemployedinanengineeringoccupation,comparedtoalmostdoublethatrate
(39.0%) for Canadian-born university-educated engineering graduates. The share of engineering
employmentwasevenloweramongthesubsetofimmigrantengineerswhoobtainedtheirdegreeoutside
ofCanada(17.6%).EvenforthesubsetofimmigrantsthatwereeducatedinCanadatheshare(24.2%)
wasmuchlowerthanfortheCanadian-born.
Asanaside,whilesomeofthemismatchmayhavebeenvoluntary,weexpectsuchcasestobe
rare among immigrants given that technical skills are much more transferable across cultures than
communicationandlanguageskills.Consistentwiththis,wefindthat,notonlyareSTEMimmigrantsless
likely thanCanadian-borntobeemployed inSTEM,butalso theirwagepenalty formismatch ismuch
larger.In2006,theaveragelabourmarketearningsofSTEMeducatedimmigrantsnotemployedinSTEM
was 44.3% lower than for those employed in STEM. For native-born Canadians, the penalty was
approximatelyhalfaslarge(23.4%).
Overall, we would clearly expect the gap in the STEM-employment-rates (and especially
engineering-employment-rates)ofCanadianimmigrantstohavelimited,inasignificantway,thepotential
ofCanada’sgrowingSTEM-university-educatedimmigrantpopulationtoboostCanadianinnovation.This
ispreciselywhatwefindinouranalysisbelow,namelythatoverall,skilledimmigrantshavelittleimpact
onCanadianinnovation,andstrongeffectsonlyemergewhenweconditiononSTEMemployment.
4.2RegressionResults
Theresultsfromestimatingequation(1)usingboththeHGLspecification(1)andarichersetof
controls(2)arereportedinTable3.ThefirstcolumnindicatesthatincreasingtheCanadianuniversity-
educatedimmigrantshareby1percentagepointisexpectedtoincreasepatentspercapitabyabout1.1
logpoints.ThecomparableU.S.estimate(seespecification(1)ofTable5inHGL)is14.7logpoints,which
fallsfaroutsidetheconfidenceintervalofourestimate.Thecoefficientonthenativeshareis,however,
almost identical to the HGL estimate (4.5 compared to the HGL estimate of 4.1) and is statistically
significantatthe10%level.Thissuggeststhatthelargedifferenceinourimmigrantshareestimatesdoes
notreflectgreatermeasurementerrorinourpopulationshares,structuraleconomicdifferencesbetween
15
thetwocountries,orotherdifferencesinourmethodologicaldifferences,suchasourfocusoncities,as
opposedtostates.Infact,ifweuseanalternativespecificationandvariabledefinitionsthatmostclosely
matchthatofHGL,thatis,using10-yearfirst-differences(insteadof5)andcountingpatentsonlyforthe
oneyearfollowingthecensusyearbasedontheresidenceofonlythefirstinventor,thedifferenceinthe
impactofuniversity-educatedimmigrantsacrossthetwocountriesbecomesevenlarger.Althoughthe
variancesoftheestimatedcoefficientsincreasesubstantially,presumablyduetothesmallersamplesize
andnoisierdependentvariable, thepointestimates suggesteven smallerbeneficial impactsof skilled
immigrationinCanada,andaslightlylargerimpactofskillednatives.15
ThesecondcolumnofTable3presentsourresultsusingarichersetofcontrols.Althoughthe
university-educatedimmigrantcoefficientincreasesto3.5,onparwiththeeffectofuniversity-educated
natives, this coefficient is still statistically insignificant and much smaller than the HGL benchmark
estimate. In the next two columns of Table 3we instead define the skilled population as university-
educatedindividualswhoareemployedinaSTEMoccupation.Asexpected,thepointestimatesincrease
substantially,andthecoefficientsonimmigrantsandnativesarenowsimilarandmuchlarger.Usingthe
HGLcontrols,theestimatedeffectsofincreasingtheskilledimmigrantpopulationsharearenow7.3and
6.3 for immigrants and natives, respectively, but neither estimate is statistically significant. However,
using the richer set of controls increases these estimates to 21.7 and 19.0 and both coefficients are
statisticallysignificantatthe10%level.Takenasawhole,theresultsinTable3appeartosuggestthatthe
impactofuniversity-educated immigrationonCanadianpatentinghasbeenmodestandthat this is in
largepartduetothelowemploymentratesofSTEM-educatedCanadianimmigrantsinSTEMjobs.
In Table 4, we explore this issue in more detail by redefining the skilled population using
informationonfieldofstudy.Sinceweareforcedtodropthe1986-1981differences,were-estimatethe
firsttwocolumnsofTable3usingthesmallersample(columns1and2).Thekeyresultisthatrefiningour
definition of skilled to mean university educated in a STEM field has essentially no impact on the
immigrant coefficient, but increases the native coefficient substantially. Both immigrant coefficients
remainclosetozeroandareinsignificant,whereasthenativecoefficients increaseto16.8and19.1in
specifications (1) and (2), respectively (compared to 5.4 and 4.2 in columns 1 and 2) and are both
significant.ThedifferenceintheimpactofSTEM-educatedimmigrantsandnativesisstark.Anobvious
questionistowhatextentthedifferencereflectstheforeigneducationalcredentialsofimmigrants.Inthe
fifthandsixthcolumnsofTable4,wedistinguishbetweenCanadian-andforeign-educatedimmigrants.
15Theseresultsareavailablefromtheauthorsuponrequest.
16
AlthoughtheestimatesforCanadian-educatedimmigrantsarelarger,theyarestillmuchsmallerthanthe
comparablecoefficients fornatives, suggesting that thedifference reflects,at least inpart, something
other than schooling quality. One possible explanation is employer discrimination against Canadian-
educatedimmigrantswithethnicnames,consistentwiththeCanadianauditstudyofOreopoulos(2011).
Finally, inthelasttwocolumnsofTable4weexaminetheimpactofincreasingthepopulation
shareofimmigrantsandnativesthatarenotonlyuniversity-educatedinaSTEMfield,butalsoemployed
inaSTEMoccupation.Hereweseeasubstantialincreaseinthecoefficientontheimmigrantpopulation
share to 9.3 and 36.3 in specifications (1) and (2), respectively. The latter coefficient is statistically
significant at the 10% level, larger than the coefficient for natives (althoughnot significantly so), and
comparable inmagnitudetothe52.4fortheimmigrantscientistsandengineersshareinHGL(Table6
panelC).Takenasawhole,theestimatesappeartosuggestthattherelativelysmallcontributionofskilled
immigrants to innovation in Canada does not reflect the educational backgrounds of Canadian
immigrants,intermsofeithertheirrelativeconcentrationinSTEMfieldsorthequalityoftheirschooling.
Rather, it seems that barriers to employment in STEM jobs are the primary source of their modest
contributiontoinnovation.
It is, of course, possible that our naïve FD estimates are downward biased, perhaps as a
consequence of measurement error in the Canadian population shares. In Table 5, we examine the
robustnessofourestimatestoinstrumentingimmigrationtoCanadiancities.AsdescribedinSection3,
weinstrumentchangesinskilledimmigrantpopulationsusingstockpopulationsbasedonCensusdata.
Ourfirststageestimatesaresignificantatthe1%level.
Using our complete sample, we define skilled workers as: (i) the university educated; or (ii)
university-educatedandemployedinaSTEMjob.TheIVestimatesoftheeffectofraisingtheuniversity-
educated immigrant share change little and continue to suggest small positive and statistically
insignificanteffects. This is in sharp contrast toHGL,whoseestimatesbasedon the same instrument
nearlydoubleinmagnitude(seePanelAofTable8).Isolatingtheeffectofincreasingthepopulationshare
comprisedof university-educated immigrantswho are employed in a STEM job continues to produce
substantiallylargerestimates.Usingtherichercontrols(specification2)thepointestimategoesfrom1.1
to10.4andisstatisticallyinsignificant,althoughthelatterisnowhalfwhatitwasinTable3..16
16Afurtherconcernisthattheinclusionofendogenouscontrolvariablescouldbiasourresults.WerantheIV
specificationsintable5withonlyfixedeffectsandobtainedsimilarcoefficientsfortheshareofuniversity-
17
5 Conclusions
Canadaisanimportantcasestudyforunderstandingthepotentialforaselectiveimmigrationpolicyto
raiseinnovation,asits`pointssystem’forscreeningprospectiveimmigrantsisseenbymanyasamodel
ofhowtoraisetheaverageskilllevelsofimmigrationinflows.Ouranalysissuggeststhatwhilethe`points
system’seemstohavereachedthisobjectiveofincreasingthelevelofhumancapital,itsoverallsuccess
isquestionable,particularlyinthecontextofleveragingimmigrationasameanstofosterinnovation.In
thisregard,ourfindingssuggestthatanincreaseintheshareofskilledimmigrantshasasmallerimpact
oninnovationthananincreaseintheshareofskilledCanadian-bornindividuals,inspiteofimmigrants
disproportionatelyholdingSTEMdegrees.Moreover,ourestimatessuggestanunambiguously smaller
impactofuniversity-educatedimmigrantsinCanada,relativetothatofuniversity-educatedimmigrants
intheU.S.,andthis,incontrasttothealmostidenticalestimatedimpactsforuniversity-educatednative-
bornintheU.S.andCanada.
Howcanwe reconcile these facts?Ouranalysis suggests that thesedifferencescanbe largely
attributedtothedifficultiesthatCanadianSTEMimmigrantsfaceinfindingSTEMemployment.Whilein
theU.S.,one-halfofSTEM-educatedimmigrantsareemployedinSTEM,inCanadatheshareisroughly
one-third(comparedtoashareofapproximately0.4fornativesinbothcountries).Consistentwiththis,
themainfindingfromouranalysisisthatCanadianuniversity-educatedimmigrants,andevenCanadian
STEM-university-educatedimmigrantshavelittleimpactonpatentingrates,untilweconditiononSTEM
employment.WefindthatanincreaseintheshareofCanadianSTEM-educatedimmigrantsemployedin
STEMhasalargeandsignificanteffectonpatentingrates.Moreover,thiseffectiscomparable(andinfact
slightlylarger)tothatofCanadian-bornindividualseducatedandemployedinSTEM,andalsosimilarto
theeffectofscientistandengineerimmigrantsintheU.S..
ButwiththelargemajorityofSTEM-educatedimmigrantsnotfindingemploymentinSTEM,the
impactofCanadianskilledimmigrationonpatentingrateshasbeenrelativelymodest.Infact,therateof
STEMeducation-jobmismatchamongimmigrantsis,ifanything,increasingovertime,particularlyrelative
tothatofnatives.Thisshouldbecauseforconcernforpolicymakers,notonlyinCanada,butalsoinother
countriesthatareconsideringtheadoptionofa pointssystem’.Itwouldappearthatputtingmoreweight
onSTEMeducationalbackgroundsisunlikelytohavethedesiredeffectofboostinginnovation.Selecting
immigrants with STEM skills is not sufficient, given the challenges that Canadian STEM-educated
educatedimmigrantsandsomewhatlargerbutstillinsignificantcoefficientsonuniversity-educatedstem-
employedimmigrantshares.
18
immigrants appear to face in obtaining STEM jobs. The critical question for policy is whether the
employmentbarriersthatSTEM-educatedimmigrantsappeartofacereflectdifferencesintheirskillsand
abilitiesorlabourmarketinefficienciesarisingfrominformationfrictionsinjobsearch,foreigncredential
assessment,orracialdiscrimination.Inthisregard,itisnoteworthythatSTEM-educatedimmigrantsfind
STEMemploymentlessfrequentlythannativesevenwhentheywereeducatedinCanadianuniversities
andthatthecontributionofSTEM-educatedimmigrantsfromCanadianuniversitiesappearstoalsofall
farshortofthecomparablecontributiontoinnovationofnative-bornCanadians.Thissuggeststousthat
morethaninformationfrictionsaroundthevalueofimmigrants’educationalcredentialsareatplay.
AkeydifferencebetweentheCanadianandU.S.skilledimmigrationpolicy,isthatwhereasskilled-
streamimmigrantsarrivinginCanadadonottypicallyhavepre-arrangedemployment,thevastmajority
ofskilledimmigrantsintheU.S.areadmittedviatemporaryworkpermitsfromsponsoringemployers(H-
1Bvisas inparticular).17TheCanadian `pointssystem’hashistoricallygrantedpermanentresidencyto
foreign applicants solely on the basis of their foreign educational credentials and years of work
experience. To the extent that U.S. employers have richer information regarding the productivity of
foreign workers, STEM-educated immigrants in the U.S. are not only more likely to “hit the ground
running”withajob,butmayalsobeofhigherlabourmarket“quality”ondimensionsunobservabletothe
`points system.’ This suggests that a greater emphasis on pre-arranged employment in immigrant
selectioncouldbebeneficial.Indeed,thepastdecadehasseentheintroductionofanumberofnewskilled
immigrationprogramseasingthetransitiontopermanentresidencyforindividualswithCanadianwork
experienceandjoboffersfromCanadianemployers.18Timewilltellwhethertheseprogramshavebeen
successfulinraisingtheSTEM-employmentratesofCanada’sSTEM-educatedimmigrantsand,inturn,the
contributionofCanada’sskilledimmigrationpolicytoinnovation.
17AdministrativedatafromtheU.S.OfficeofImmigrationStatisticsindicatethatsomewherebetween75%and
90%ofnewskill-streampermanentresidentsintheU.S.between2001and2011transitionedfromatemporary
workpermitorstudentvisa(seeYearbookofImmigrationStatistics,HomelandSecurity,variousyears).Incontrast,
overthesameperiod,between10%and25%ofCanadianskilled-streamimmigrantstransitionedfromaworkor
studentvisa(seeFactsandFigures,Immigration,Refugees,andCitizenshipCanada,variousyears).18TheseprogramsincludetheCanadianExperienceClassprogramintroducedin2008,ProvincialNominee
Programs(Ontariowasthelastprovincetointroduceaprogramin2007),andtheExpressEntrySystemfor
processingapplicationsforpermanentresidency,whichwasintroducedin2015.
19
CompliancewithEthicalStandards
Funding:ThisstudywasfundedbytheSocialScienceandHumanitiesResearchCouncilofCanada
(SSHRCGrant#430-2016-00143)
Conflictofinterest:Theauthorsdeclarethattheyhavenoconflictofinterest
20
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Figure1:University-educatedimmigrantpopulationsharesandpatentspercapita,CanadaandtheUSA,1980-2006
Notes:ForeachofCanadaandtheU.S.thefigurepresentstheshareofthepopulationaged25andoverthatiscomprisedofuniversity-educatedimmigrants(lefthandsideaxis)andthenumberofUSPTOpatentsgrantedtoCanadianandU.S.inventorsper100,000population(righthandsideaxis).Forthelatterseries,theyearistheapplicationyearofthepatent.Fractionalpatentswereawardedtoeachcountrywhenthepatenthadmultipleinventorsfromdifferentcountries.OnlypatentsgranteduptoNovember2014weretabulated.Forbothcountries,boththeshareofUniversity-educatedimmigrantsandpatentspercapitashowanoverallincrease.
010
2030
4050
Pate
nts
per c
apita
(x 1
00,0
00)
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7U
nive
rsity
-edu
cate
d im
mm
igra
nt s
hare
1980 1986 1991 1996 2001 2006
CA immigrants US immigrants CA patents US patents
23
Table1:Population-weightedsamplemeansbyCensusyear
1981 1986 1991 1996 2001 2006 2006–1981/6difference
Patents 489.7 744.2 1055.2 1553.1 1755.9 1668.7 1179.0***Patentspercapita(x100,000) 42.2 58.5 74.0 105.8 113.2 103.0 60.8*** Population 971,384 1,074,428 1,169,049 1,277,834 1,383,794 1,504,691 533,307***Immigrantpopulationshare 0.223 0.219 0.231 0.247 0.255 0.268 0.046**
- Universityeducated 0.027 0.030 0.037 0.047 0.060 0.076 0.050***- UniversitySTEMeducated -- 0.010 0.012 0.016 0.022 0.030 0.020***- Canadian-universitySTEMeducated -- 0.005 0.006 0.008 0.10 0.013 0.008***- Foreign-universitySTEMeducated -- 0.005 0.006 0.008 0.012 0.017 0.012***- Universityeducated&STEMemployed 0.004 0.004 0.005 0.006 0.009 0.011 0.007***- UniversitySTEMeducated&STEMemployed 0.003 0.004 0.005 0.008 0.010 0.006***
Native-bornpopulationshare 0.777 0.781 0.769 0.753 0.745 0.732 -0.046**- Universityeducated 0.073 0.087 0.102 0.115 0.128 0.142 0.069***- UniversitySTEMeducated -- 0.019 0.021 0.022 0.025 0.027 0.008***- Universityeducated&STEMemployed 0.007 0.008 0.009 0.010 0.013 0.014 0.007***- UniversitySTEMeducated&STEMemployed 0.006 0.007 0.008 0.009 0.010 0.004***
Meanage 32.6 33.7 34.6 35.4 36.7 38.0 5.3***Meanincome 9222 13,398 18,385 19,430 24,032 28,947 19,725***Employmentrate 0.659 0.657 0.672 0.652 0.688 0.700 0.041***Expectedpatentspercapita(x100,000) 42.2 58.4 73.9 105.7 113.1 102.9 60.7*** Observations 98 98 98 98 98 98 196
Notes:SamplemeansofvariablesusedintheregressionsbyCensusyear.ThemeansareweightedbycitypopulationssothattheyarerepresentativeoftheCanadianpopulationresidingwithinoneofCanada’slargest98cities.PatentsarethecumulativesumofannualpatentsinthefiveyearsfollowingeachCensusyear.Populationsharesarecalculatedasthefractionofindividualsaged15-70thatfallineachcategory.The1981CanadianCensusdoesnotreportfieldofstudy.Incomesarenotdeflated.Expectedpatentspercapitacontrolsforthenumberofpatentsthateachcitywouldhavebasedonitsdistributionof1972-1980patentsacrossdifferentpatentclassesandthesubsequentnational-levelgrowthinthenumberofpatentsforeachofthosepatentclassesacrossCensusyears.*p<.10,**p<.05,***p<.01.
24
Table2:ConditionalprobabilitiesofSTEMeducationandSTEMemploymentforimmigrantsandnatives
1986 1991 1996 2001 2006 2006–1981difference
Immigrants Pr[Universityeducated] 0.138 0.160 0.188 0.233 0.285 0.165Pr[STEMeducated|universityeducated] 0.324 0.328 0.337 0.374 0.387 0.062Pr[Canadianeducation|STEMuniversityeducated] 0.505 0.519 0.500 0.447 0.429 -0.076Pr[Foreigneducation|STEMuniversityeducated] 0.495 0.481 0.500 0.553 0.571 0.076Pr[STEMemployed|STEMuniversityeducated] 0.348 0.338 0.311 0.345 0.322 -0.026Pr[STEMemployed|CanadianSTEMuniversityeducated] 0.363 0.355 0.322 0.343 0.343 -0.019Pr[STEMemployed|ForeignSTEMuniversityeducated] 0.333 0.320 0.301 0.347 0.307 -0.027 Natives Pr[Universityeducated] 0.112 0.132 0.153 0.172 0.194 0.101Pr[STEMeducated|universityeducated] 0.214 0.202 0.193 0.195 0.191 -0.023Pr[STEMemployed|STEMuniversityeducated] 0.342 0.355 0.355 0.370 0.370 0.028
Notes:Conditionalprobabilitiesconstructedusingthemeanpopulationshares(weightedbypopulationsize)forindividualsaged15-70acrossCanada’slargest98cities.Canadianimmigrantsaremorelikelytoholdauniversitydegreethantheirnative-borncounterpartsandthisdifferencehasgrownovertime.University-educatedimmigrantsarealsomorelikelytobeeducatedinaSTEMfieldthantheirnative-borncounterpartsandthisdifferencehasalsobecomelargerovertime.However,theprobabilityofaSTEM-university-educatedimmigrantbeingemployedinaSTEMoccupationhastendedtodecreaseovertime,whereasithasincreasedfornatives.Thissuggestsaneducation-jobmismatchforimmigrants.
25
Table3:WLS-FDestimatesoftheeffectofuniversity-educatedanduniversity-educated-STEM-employedimmigrantpopulationsharesonlogpatentspercapita
University-educated University-educated&STEM-employed (1) (2) (1) (2)Immigrantpopulationshare 1.118
(1.677)3.508(2.992)
7.276(7.915)
21.743*(12.887)
Nativepopulationshare
4.457*(2.391)
3.315(3.303)
6.328(9.318)
19.007*(11.415)
Logmeanage 0.494(1.257)
-0.589(1.507)
0.772(1.228)
-0.431(1.452)
Logpopulation(1981) 0.003(0.008)
-0.006(0.012)
0.006(0.008)
-0.009(0.013)
Logmeanincome(1981) 0.053(0.112)
-- 0.005(0.113)
--
Logmeanincome -- -0.028(0.607)
-- -0.521(0.630)
Employmentrate -- -0.094(1.266)
-- -0.034(1.275)
Logexpectedpatentspercapita -- 0.202*(0.116)
-- 0.231*(0.118)
Yearfixedeffects Yes No Yes NoYear-regionfixedeffects No Yes No Yes R-squared 0.285 0.332 0.284 0.340Numberofobservations 490 490 490 490
Notes:Weightedleastsquares(observationsareweightedbycitypopulation)regressionswithfiveyearfirstdifferences.Thedependentvariableisthelogofpatentspercapita.Standarderrorsareclusteredbycity.ThesampleconsistsofCanada’s98largestcitiesand1986-1981,1991-1986,1996-1991,2001-1996,and2006-2001firstdifferences.Specification(1)attemptstorecreatethespecificationinHGLwhilespecification(2)includesarichersetofcontrols.*p<.10,**p<.05,***p<.01.
26
Table4:WLS-FDestimatesoftheeffectofuniversity-educated,university-STEM-educated,anduniversity-education-STEM-employedimmigrantpopulationsharesonlogpatentspercapita
University-educated University-STEM-educated University-STEM-educated University-STEM-educated&STEM-employed
(1) (2) (1) (2) (1) (2) (1) (2)Immigrantpopulationshare -1.026
(1.800)0.511(3.417)
-3.342(3.628)
1.093(4.855)
-- -- 9.265(13.658)
36.341*(19.855)
ImmigrantCanadianuniversity -- -- -- -- 4.295(29.814)
3.406(42.164)
-- --
Immigrantforeignuniversity -- -- -- -- -5.686(8.282)
0.309(13.952)
-- --
Nativepopulationshare 5.389*(3.096)
4.156(4.210)
16.784*(9.148)
19.109*(10.661)
16.525*(9.112)
19.013*(10.340)
17.563(16.666)
26.522(20.611)
Logmeanage -.260(1.476)
-1.814(1.801)
-0.452(1.397)
-1.825(1.709)
-0.357(1.349)
-1.817(1.676)
0.456(1.428)
-1.331(1.714)
Logpopulation(1981) 0.020**(0.010)
0.009(0.014)
0.020*(0.11)
0.007(0.013)
0.018(0.015)
0.007(0.019)
0.016(0.010)
-0.013(0.016)
Logmeanincome(1981) 0.072(0.119)
-- 0.072(0.120)
-- 0.066(0.122)
-- -0.034(0.126)
--
Logmeanincome
-- -0.166(0.649)
-- -0.2580.608
-- -0.261(0.597)
-- -0.874(0.697)
Employmentrate --
-0.929(1.314)
-- -1.045(1.307)
-- -1.027(1.251)
-- -0.632(1.337)
Logexpectedpatentspercapita --
0.147(0.117)
-- 0.154(0.119)
-- 0.153(0.116)
-- 0.181(0.123)
Yearfixedeffects Yes No Yes No Yes No Yes NoYear-regionfixedeffects No Yes No Yes No Yes No Yes R-squared 0.253 0.284 0.253 0.287 0.254 0.287 0.250 0.297Numberofobservations 392 392 392 392 392 392 392 392
Notes:Weightedleastsquares(observationsareweightedbycitypopulation)regressionswithfive-yearfirstdifferences.Thedependentvariableisthelogofpatentspercapita.Standarderrorsareclusteredbycity.ThesampleconsistsofCanada’s98largestcitiesand1991-1986,1996-1991,2001-1996,and2006-2001first-differences,sincefieldofstudyinformationisnotavailableinthe1981Census.Specifications(1)attempttorecreatethespecificationinHGLwhilespecifications(2)includearichersetofcontrols.*p<.10,**p<.05,***p<.01
27
Table5:IV(2SLS)estimatesoftheeffectofuniversity-educatedanduniversity-educated-STEM-employedimmigrantpopulationsharesonlogpatentspercapita
University-educated University-educated&STEM-employed (1) (2) (1) (2)Immigrantpopulationshare 2.870
(4.393)1.060(5.656)
8.730(11.347)
10.404(13.912)
Nativepopulationshare
5.350(3.650)
2.006(4.288)
5.964(8.981)
20.388*(11.115)
Logmeanage 0.733(1.409)
-0.725(1.451)
0.828(1.294)
-0.549(1.400)
Logpopulation(1981) -0.002(0.015)
0.004(0.022)
0.006(0.009)
-0.001(0.011)
Logmeanincome(1981) 0.027(0.107)
-- -0.001(0.113)
--
Logmeanincome -- 0.121(0.613)
-- -0.259(0.580)
Employmentrate --
-0.235(1.251)
-- -0.212(1.257)
Logexpectedpatentspercapita --
0.202*(0.111)
-- 0.221**(0.109)
Yearfixedeffects Yes No Yes NoYear-regionfixedeffects No Yes No Yes R-squared 0.285 0.331 0.284 0.338Numberofobservations 490 490 490 490Firststage:Exp.ImmigrantShare
0.622***(0.157)
0.588***(0.144)
0.943***(0.327)
0.908***(0.194)
Fstatistic 64.90 345.39 32.01 189.69Notes:Weinstrumentlocalskilledimmigrantpopulationsusingpredictedimmigrantpopulationsbasedonthehistoricalcity-levelsettlementpatternsofimmigrantsfromparticularorigincountriesandnational-levelpopulationsofimmigrantsfromthosecountries.Estimatesarefromtwo-stageleastsquare.Observationsareweightedbycitypopulation.Standarderrorsareclusteredbycity.ThesampleconsistsofCanada’s98largestcitiesand1986-1981,1991-1986,1996-1991,2001-1996,and2006-2001firstdifferences.Specifications(1)attempttorecreatethespecificationinHGLwhilespecifications(2)includearichersetofcontrols.*p<.10,**p<.05,***p<.01.
28
AppendixSTEMfieldsofstudyintheCanadianCensusdataareidentifiedusinginformationonmajorfieldofstudy(MFS),whichisidentifiedforallindividualswhohavecompletedapost-secondaryprogramofstudy.MajorfieldofstudyiscodedusingaMFSclassificationsystemduringthecensusyears1986,1991,1996and2001,whilein2006itiscodedaccordingClassificationofInstructionalProgram(CIP)Canada2000.Therefore,weusetheMFSclassificationasthemastercodeandmaptheCIPtoMFS,andthenselectthestudyfieldsfromMFStoidentifySTEMfields.
ToconstructaconcordancebetweenMFSandCIP,wemakeuseoftheempiricalconcordancesfromCIPtoMFSprovidedbyStatisticsofCanada(http://www12.statcan.ca/census-recensement/2006/ref/dict/app-ann020-eng.cfm).Theempiricalconcordancesprovidemappingsofthedistributionalrelationshipsbetweenthetwoclassifications.Thedetailsaredescribedonthewebsite.TherearethreelevelsofMFSandCIPgroupingsrespectively,correspondingly,threeconcordancesareprovidedforeachgrouplevel:CIPprimarygroupings-MFSmajorlevel(level1),CIPsubseries(4digit)andMFSminorlevel(level2),andCIPinstructionalprograms(6digit)andMFSunitlevel(level3).Intheseconcordances,asharevariableiscalculatedasthepercentageoftotalCIPthatisaccountedforbythespecificMFScode.ThusforeachCIP,thesharesaddupto1.AhighersharevalueindicatesamorefrequentoccurringofaMFSinaCIP.
OurstrategyistotakethesharevariableforeachCIPandapplythemodemethod.Inparticular,westartfromthelevel3concordance(theleastaggregatedcategories),andmapaCIPtoaMFSwhichreturnsahighestsharevaluegiventhatparticularCIP.IftherearesomeCIPcategoriesnotmappedtoMFSinlevel3concordances,wethenusethelevel2concordancesandapplythesamemethod,andthenlevel1(Atlast,therearequitefewCIPcategoriesnotbeingmapped,wethenreadthedescriptionsonthoseCIPvariablesandmapthemtoMFSmanually.).AlistoftheconcordanceisprovidedinTable3.Consequently,theSTEMfieldismadeupbyfourmajorMFScategories:‘Agricultural,biological,nutritionalandfoodsciences’,‘Engineeringandappliedsciences’,‘Appliedsciencestechnologiesandtrade;Mathematics’,and‘Computerandphysicalsciences’.
TheSTEMoccupationvariableisconstructedbasedontheoccupationinformationineachcensusfile.Tobespecific,1980standardoccupationalclassification(occ81)systemisusedin1981and1986censusfilesrespectively,and1991standardoccupationalclassification(soc91)systemisusedin1991,1996,2001and2006censusfilesrespectively.Accordingly,in1981and1986censusfiles,theSTEMoccupationisidentifiedifthevariableocc81fallsintothecategory‘MajorGroup21–OccupationsinNaturalsciences,engineeringandmathematics’;whileintherestcensusfiles,theSTEMoccupationisidentifiedifthevariablesoc91fallsintothecategory‘C-NaturalandAppliedSciencesandRelatedOccupations’.
29
TableA1:SamplewithoutToronto-FDestimatesoftheeffectofuniversity-educatedanduniversity-educated-STEM-employedimmigrantpopulationsharesonlogpatentspercapita
University-educated University-educated&STEM-employed (1) (2) (1) (2)Immigrantpopulationshare 2.838
(2.956)7.733*(4.518)
26.339*(15.077)
42.861***(15.573)
Nativepopulationshare
3.831(2.789)
2.917(3.281)
-5.397(12.961)
10.906(13.532)
Logmeanage 0.305(1.222)
-0.212(1.448)
0.665(1.157)
-0.082(1.391)
Logpopulation(1981) 0.008(0.010)
-0.008(0.014)
0.015(0.010)
-0.006(0.011)
Logmeanincome(1981) 0.031(0.122)
-- -0.046(0.121)
--
Logmeanincome -- -0.490(0.688)
-- -1.130(0.764)
Employmentrate -- 0.746(1.313)
-- 1.094(1.253)
Logexpectedpatentspercapita -- 0.167(0.109)
-- 0.196*(0.109)
Yearfixedeffects Yes No Yes NoYear-regionfixedeffects No Yes No Yes R-squared 0.259 0.305 0.263 0.318Numberofobservations 485 485 485 485
Notes:Weightedleastsquares(observationsareweightedbycitypopulation)regressionswithfiveyearfirstdifferences.Thedependentvariableisthelogofpatentspercapita.Standarderrorsareclusteredbycity.ThesampleconsistsofCanada’s97largestcitieswiththeexceptionofTorontoand1986-1981,1991-1986,1996-1991,2001-1996,and2006-2001firstdifferences.Specifications(1)attempttorecreatethespecificationinHGLwhilespecifications(2)includearichersetofcontrols.*p<.10,**p<.05,***p<.01
30
TableA2:Sampleofcitieswithapopulationofatleast40,000in1981–UnweightedFDestimatesoftheeffectofuniversity-educatedanduniversity-educated-STEM-employedimmigrantpopulationsharesonlogpatentspercapita
University-educated University-educated&STEM-employed (1) (2) (1) (2)Immigrantpopulationshare 7.146
(6.062)8.788(6.527)
38.742*(19.393)
30.638(20.571)
Nativepopulationshare
8.605**(4.256)
5.191(5.473)
20.399(23.722)
29.476(26.300)
Logmeanage -0.330(1.898)
-1.782(2.035)
0.113(1.931)
-1.495(2.119)
Logpopulation(1981) -0.004(0.022)
-0.024(0.023)
0.007(0.017)
-0.013(0.014)
Logmeanincome(1981) -0.260(0.244)
-- -0.299(0.237)
--
Logmeanincome -- 1.004(0.825)
-- 0.760(0.880)
Employmentrate -- -1.027(2.300)
-- -0.995(2.243)
Logexpectedpatentspercapita -- 0.116(0.140)
-- 0.146(0.144)
Yearfixedeffects Yes No Yes NoYear-regionfixedeffects No Yes No Yes R-squared 0.241 0.346 0.243 0.352Numberofobservations 265 265 265 265
Notes:OLSfirst-differenceregressions.Thedependentvariableisthelogofpatentspercapita.Standarderrorsareclusteredbycity.Thesampleconsistsofthe53citieswithapopulationofatleast40,000in1981and1986-1981,1991-1986,1996-1991,2001-1996,and2006-2001firstdifferences.Specifications(1)attempttorecreatethespecificationinHGLwhilespecifications(2)includearichersetofcontrols.*p<.10,**p<.05,***p<.01
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