Skill, Innovation and Wage Inequality: Can Immigrants be the Trump Card?
- Authors
- Gouranga G. Das; Marjit, Sugata; Kar, Mausumi
- Issue Date
- Oct-2019
- Publisher
- Ifo Institute for Economic Research Center for Economic Studies
- Keywords
- H1B; immigration; innovation; wage gap; skill; R& D; policy; RAISE Act; VAR
- Citation
- CESifo Working Papers, no.7794, pp 1 - 39
- Pages
- 39
- Indexed
- FOREIGN
- Journal Title
- CESifo Working Papers
- Number
- 7794
- Start Page
- 1
- End Page
- 39
- URI
- https://scholarworks.bwise.kr/erica/handle/2021.sw.erica/2392
- ISSN
- 1617-9595
2364-1428
- Abstract
- With the ensuing immigration reform in the US, the paper shows that targeted skilled immigration into the R&D sector that helps low-skilled labor is conducive for controlling inequality and raising wage. Skilled talent-led innovation could have spillover benefits for the unskilled sector while immigration into the production sector will always reduce wage, aggravating wage inequality. In essence, we infer: (i) if R&D inputs contributes only to skilled sector, wage inequality increases in general; (ii) for wage gap to decrease, R&D sector must produce inputs that goes into unskilled manufacturing sector; (iii) even with two types of specific R&D inputs entering into the skilled and unskilled sectors separately, unskilled labor is not always benefited by high skilled migrants into R&D-sector. Rather, it depends on the importance of migrants' skill in R&D activities and intensity of inputs. Inclusive immigration policy requires inter-sectoral diffusion of ideas embedded in talented immigrants targeted for innovation. Empirical verification using a VAR regression model in the context of the USA confirms the conjectures, and the empirical results substantiates our policy-guided hypothesis that skilled immigration facilitates innovation with favorable impact on reducing wage-gap.
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