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Migration, diversity, innovation

Migration, diversity, innovation. Max Nathan LSE | NIESR | IZA LSE London conference, London, 24 March 2014. What I ’ m going to talk about. Context: international, UK, London A simple framework The evidence High-level policy implications. 2. International context.

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Migration, diversity, innovation

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  1. Migration, diversity, innovation Max Nathan LSE | NIESR | IZA LSE London conference, London, 24 March 2014

  2. What I’m going to talk about Context: international, UK, London A simple framework The evidence High-level policy implications 2

  3. International context Between 2000/1 and 2010/11, in OECD countries: 20% rise in migration (100m people) 70% rise in skilled migration (27.3m) (UN-DESA / OECD 2013) Skilled migrants now comprise nearly 29% of migrants in OECD countries, up from 24% in 2000/1. And rising! ‘Skilled’ = qualifications, knowledge, experience Need to re-think the likely economic impacts of migrants Important implications for migration policy 3

  4. Population change in the UK Source: ONS (2011) 4

  5. London Source: Hall (2011) 5

  6. A growth framework Analysis of labour market impacts of migration tends to follow a static, neoclassical framework: one-off shocks, impacts on jobs and wages, migrants assumed to be workers Analysis of wider economic impacts needs a dynamic setting: Human capital => ideas => long run growth Firms invest in innovative capacity, can face constraints Trade costs vary with information, co-ordination costs New firms enter markets, compete with incumbents Migrants have human / social / financial capital, play multiple roles, are imperfect substitutes for native-born 6

  7. Places to look Firms – effects on productivity and its drivers (via innovation, market access, task substitution) Product markets – effects on structure, competition (via entrepreneurship) => and impacts on incumbents Labour markets–short term and long term effects (via employer response, historic conditions) Consumption – market goods, public services, housing 7

  8. Innovation: concepts Innovation = the generation and exploitation of new ideas It’s a noisy process – lots of ideas, few good / strong ones Upstream and downstream aspects of innovation: Ideas generation Commercialisation of ideas Ideas diffusion (Fagerberg 2005) How do immigration, diversity fit in? 8

  9. Innovation: theory Migration may positively select stars / experts More diverse teams = improved knowledge spillovers and ideas generation; ideas flow through diasporic groups At market level, migrant entrepreneurship may force incumbents to innovate. There will be winners and losers Cities like London could amplify these channels: they enhance productivity and have big migrant populations Constraints = is this really a migrant ‘x-factor’? Workplace diversity => lower bonding capital, trust? Discrimination? 9

  10. Innovation: evidence Not as much of it as we’d like … US evidence: clear links from skilled migrants and diasporas to innovation and trade, especially in tech sectors European evidence: benefits from diverse teams, but effects tend to be small and focused on export-orientated activities Cities: evidence suggesting urban spillovers, e.g. Bay Area 10

  11. Innovation: London evidence London studies / Nathan and Lee 2010, 2013: Cross-sectional analysis of 7,600 firms, 2005-2007 Small diversity bonus from diverse workforce, top teams Positive links to ideas generation, but not to revenue growth Operates across all sectors, not just the ‘knowledge economy’ Migrant-diverse firms more exports-orientated Small positive link between migrant status and proactive entrepreneurship But other factors in the mix too (cf case study evidence) 11

  12. Policy implications Reasons to expect (skilled) migration to boost innovation in the UK, especially in cities like London Less obvious how to design policy to maximise this This area of migration policy is basically experimental Impact evaluation is hard to do: importance of clear rule-based policy design + open data What are the additional effects of migrants on innovation? What are the distributional effects of migrants? 12

  13. Policy implications Big question: highly targeted programmes (like Canada, US, NZ, Australia …) or rely on scale / large numbers? Tier 1 inflows are tiny compared to e.g. EU/EEA inflows, which are effectively unregulated But targeted programmes only need a couple of ‘big wins’ Important to experiment, flex targeted schemes – many parallels to industrial policy Should London have its own ‘city visas’? Yes = London is different, helpful policy experiments No = complexity, competition, what about other UK cities? 13

  14. Thanks. m.a.nathan@lse.ac.uk maxnathan.com @iammaxnathan

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