Is Immigration Policy Holding Back Innovation?

The United States’ two major political parties continue to spar over various aspects of immigration reform, including the construction of a (whole or partial) border wall between the US and Mexico, the future of the Deferred Action for Childhood Arrivals program, and the number of immigrants that will be allowed to enter the United States annually.

The Trump administration has been able to ban citizens of Iran, Libya, Syria, Yemen, Somalia, Chad, and North Korea from legally entering the US, and it has also rescinded long-observed but officially temporary protections for 200,000 Salvadoran immigrants who moved to the US after a pair of earthquakes in 2001. Meanwhile, H-1B visa applications—filed by employers on behalf of skilled foreign workers—dropped by 16 percent in fiscal 2017, the biggest decline since at least 2007.

As the US has become perceived as less hospitable to immigrants, what does that mean for the pace of innovation among US companies? To find out, Chicago Booth’s Initiative on Global Markets polled its US and European Economic Experts Panels. Members of both panels largely accepted that the country’s appeal to foreign workers has changed, and that that change will negatively affect innovation, though the US panel was more pessimistic: 72 percent agreed that “the appeal of the US as a destination for immigrants has changed in ways that will likely decrease innovation,” while 61 percent of the European experts agreed. Only 2 percent of US panelists, and 4 percent of the Europeans, disagreed.

“The rhetoric is awful and the policy environment is toxic, but the US still offers extraordinary opportunity,” wrote Jonathan Levin of Stanford University, while his colleague Robert Hall replied that the US is no less a desirable place for immigrants but that it is “possibly harder for them to enter.”