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Skill, Innovation and Wage Inequality: Can Immigrants be the Trump Card?

Title
Skill, Innovation and Wage Inequality: Can Immigrants be the Trump Card?
Author
Das, Gouranga G.
Keywords
H1B; immigration; innovation; wage gap; skill; R&D; policy; RAISE Act; VAR
Issue Date
2019-08
Publisher
Ifo Institute for Economic Research
Citation
CESifo Forum, Page. 1-39
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.
URI
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3468023http://repository.hanyang.ac.kr/handle/20.500.11754/117839
Appears in Collections:
COLLEGE OF BUSINESS AND ECONOMICS[E](경상대학) > ECONOMICS(경제학부) > Articles
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