High-skilled Migration, Ethnic Diversity, and Innovation in China

YUANYUAN GU, Nanjing University of Information Science and Technology
Mary Arends-Kuenning, University of Illinois

This paper explores the causal effects of high-skilled immigrants' ethnic diversity on innovation in China. Economists have extensively studied the impact of immigration on host countries; however, the empirical evidence regarding developing countries like China is still scarce. By using the city-industry-level innovation index and high-skilled migrants diversity indices, the results indicate that differences in the knowledge and capabilities of workers from diverse cultural backgrounds boost the performance of regional R&D sectors. To address endogeneity issues, we apply a pseudo-gravity model and a shift-share method to construct our instrumental variables. Furthermore, by decomposing the diversity index, we find that the innovation effect of cultural diversity mainly comes from the diversity between natives and all immigrants, which indicates that the diversity among the immigrant groups does not significantly impact the innovation effect. Finally, in light of the research conclusions, this paper gives policy recommendations emphasizing the benefits of building an international talent network and reducing barriers to international talent mobility.

Keywords: International Migration, Economic Demography, Human Capital, Education, and Work

See paper.