High-Skill Immigration, Innovation, and Creative Destruction

Abstract

Economists have identified product entry and exit as a key mechanism through which innovation translates into economic growth. In this paper we document how high-skill immigration, under the H-1B visa program, affects product reallocation (entry and exit) at the firm level. We create a new dataset by matching data on H-1B Labor Condition Applications (LCAs) to the retail scanner data on products and Compustat data on firm characteristics. We first document that H-1B certification is associated with higher product reallocation, which in turn is associated with revenue growth. Our results shed light on new channels of innovation by high-skill immigrants and the ensuing consequences for the US economy.

Keywords: H-1B Visa, Product Reallocation, Schumpeterian Growth

JEL Classification: D2, F2, O3