Immigration and Innovation in European Regions

Tinbergen Institute Discussion Paper 11-112/3

33 Pages Posted: 11 Aug 2011

See all articles by Ceren Ozgen

Ceren Ozgen

University of Birmingham

Peter Nijkamp

VU University of Amsterdam - Department of Spatial Economics; Tinbergen Institute

Jacques Poot

Vrije Universiteit Amsterdam, Department of Spatial Economics; University of Waikato - National Institute of Demographic and Economic Analysis; Motu Economic and Public Policy Research; IZA Institute of Labor Economics

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Date Written: August 11, 2011

Abstract

The concentration of people with diverse socio-cultural backgrounds in particular geographic areas may boost the creation of new ideas, knowledge spillovers, entrepreneurship, and economic growth. In this paper we measure the impact of the size, skills, and diversity of immigration on the innovativeness of host regions. For this purpose we construct a panel of data on 170 regions in Europe (NUTS 2 level) for the periods 1991-1995 and 2001-2005. Innovation outcomes are measured by means of the number of patent applications per million inhabitants. Given the geographical concentration and subsequent diffusion of innovation activity, and the spatial selectivity of immigrants' location choices, we take account of spatial dependence and of the endogeneity of immigrant settlement in our econometric modelling. We use the location of McDonald's restaurants as a novel instrument for immigration. The results confirm that innovation is clearly a function of regional accessibility, industrial structure, human capital, and GDP growth. In addition, patent applications are positively affected by the diversity of the immigrant community beyond a critical minimum level. An increase in the fractionalization index by 0.1 from the regional mean of 0.5 increases patent applications per million inhabitants by about 0.2 percent. Moreover, the average skill level of immigrants (proxied by global regions of origin) also affects patent applications. In contrast, an increasing share of foreigners in the population does not conclusively impact on patent applications. Therefore, a distinct composition of immigrants from different backgrounds is a more important driving force for innovation than the sheer size of the immigrant population in a certain locality.

Keywords: immigration, cultural diversity, economic growth, innovation, spatial autocorrelation

JEL Classification: J61, O31, R23

Suggested Citation

Ozgen, Ceren and Nijkamp, Peter and Poot, Jacques, Immigration and Innovation in European Regions (August 11, 2011). Tinbergen Institute Discussion Paper 11-112/3, Available at SSRN: https://ssrn.com/abstract=1908138 or http://dx.doi.org/10.2139/ssrn.1908138

Ceren Ozgen (Contact Author)

University of Birmingham ( email )

Department of Economics
Birmingham, B15 2TT
United Kingdom

Peter Nijkamp

VU University of Amsterdam - Department of Spatial Economics ( email )

De Boelelaan 1105
1081HV Amsterdam
Netherlands
+31 20 4446091 (Phone)
+31 20 4445611 (Fax)

Tinbergen Institute

Gustav Mahlerplein 117
Amsterdam, 1082 MS
Netherlands

Jacques Poot

Vrije Universiteit Amsterdam, Department of Spatial Economics ( email )

De Boelelaan 1105
1081HV Amsterdam
Netherlands

University of Waikato - National Institute of Demographic and Economic Analysis ( email )

Te Raupapa
Private Bag 3105
Hamilton, 3240
New Zealand

Motu Economic and Public Policy Research

Level 1, 93 Cuba Street
P.O. Box 24390
Wellington, 6142
New Zealand

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

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