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«Discussion Paper 77-2013 MIGRATION AND INNOVATION – A SURVEY Sheida Rashidi Andreas Pyka Universität Hohenheim | Forschungszentrum Innovation und ...»

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2.3 Highly Skilled Immigration For distinguishing between high-skilled migration and low-skilled migration, a definition of high-skilled migrants is necessary. So far, the concept of “high-skilled migrant” is not precisely defined. The understanding of skilled and high-skilled persons is mixed. Basically one finds a number of sub-categories which vary across countries. High-skilled specialists, independent executives and senior managers, specialized technicians, researchers, physicians, business people, key workers (i.e. staff with special skills) and sub-contract workers are all identified as high-skilled individuals. A straightforward method for gathering data is to define high-skilled synonymous with tertiary education. Recent trends in international migration confirm that more and more migrants with tertiary education arrive in developed countries. A comparison between European and North-American countries confirms that North-America receives more highly educated immigrants. By 2002 among arriving immigrants in the United States 30 percent have been adults with a tertiary education, while only 25 percent of the new arrivals are high-skilled in Europe (figure 3).

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Source: IOM (2008), p. 54 Figure 4 shows for the year 2001 the immigrant and emigrant high-skilled population in OECD countries and the high-skilled net migration. With the exception of some Central and Eastern European countries, Mexico, Ireland, Korea and Finland, net migration is positive for the OECD countries. This implies that most OECD countries benefit from the international mobility of high-skilled persons. For the United States the number of high-skilled net migration is strongly positive (+7.7 million), Canada and Australia are ranked second and third. The figure illustrates partially the brain exchange within OECD countries.

Figure 4 Immigrant and emigrant population 15+ with tertiary education in OECD countries (Thousands) Source: Dumont & Lemaître (2005), p.126 In table 1 Reiner (2010) compares - using data from 2008 - the share of high-skilled migrants in North America and four large EU countries. This comparison shows that the European countries are characterized by a higher emigration rate of high-skilled (UK ranks highest with 16.7% followed by Germany with 8.8% whereas the value for the U.S. is 0.5% and for Canada 4.9%). Additionally, the migration balances for star scientists for the six countries are displayed. According to ISI highlyCited.com2 star scientists are defined as researchers that have been most highly cited in the period 1981-1999. Also this indicator expresses the ISI Highly Cited is a database of "highly cited researchers", scientific researchers whose publications are most often cited in academic journals, published by the Institute for Scientific Information.

advantageous position of the U.S. Accordingly Reiner (2010, p.499) summarizes: “All and all compared to USA and Canada, Europe seems to have a weak position in the competition for global talent.” Table 1 High-skilled migration in North America and the big four EU countries

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- International students International students’ inflows represent an important source of highly-skilled immigrants. In 2009 there have been 3.7 million international students enrolled worldwide, this is more than three times larger compared to the 1.1 million in 1990 (OECD 2011b). In the past three decades this number has been increasing drastically starting from 0.8 million in 1975. Not only the number of international students enrolled at universities and research institutes is increasing but also many of the international students after graduation intent to search for a job and stay in the host countries either temporarily - to gain first experience - or even for a longer time. For example in 2008-2009 around 17% of international students in Austria and around 33% of international students in Canada and 26% in Germany changed their status from students and stayed in their host countries (OECD 2011b, p. 67). Beside this, several universities are offering double degrees, student exchange programs and overseas research opportunities for PhD students. In 2008 among 3.3 million international students worldwide, 2.3 million were enrolled at the universities in OECD countries. Most international students (almost 70%) come from outside the OECD area (OECD2011 a, p. 65) and among them the Chinese and the Indian fractions are strongest.

- Migrant entrepreneurship Migrant entrepreneurs contribute to the economy of the host country by creating new businesses. Every year, migrant entrepreneurs employ on average 2.4 percent of the total number of employees in OECD countries. In the United States between 1995 and 2005, 25.3 percent of technology- and engineeringbased firms had at least one key founder who was foreign-born. 52.4 percent of Silicon Valley startups had one or more immigrants as a key founder (Wadhwa et al. 2007). In Germany, in 2007 and in 2008 migrant entrepreneurs employed more than 750,000 persons. In Canada Chinese entrepreneurs employed 650,000 workers, the majority of which were not Chinese (OECD 2011a, p. 157). Therefore, migrant entrepreneurs, not only contribute to economic performance and growth, but also to entrepreneurship and innovation.

- Intra company transfers A new form of high-skilled migration is intra-company transfers. As companies become multinational, the number of employees which move for a limited period to another country within the company increases. In several countries a considerable number of high-skilled individuals arrive as transferees.

Several countries have adapted their policies to facilitate the movement of staff within firms. The number of intra-corporate transfers depends on the number and size of multinational enterprises in a country and their willingness or ability to recruit workers locally or to temporarily transfer their own employees. Intra-company transfers account for a small fraction of migration, although they may be a significant fraction of high-skilled labor movement (OECD 2011a, p. 56). Multinational firms make use of this flexibility in moving their specialists in response to their needs in different locations without having to be dependent on the existent regional competencies in the areas in which they are doing business. According to OECD data (OECD 2011a, p. 57) in 2009 a total of 124 thousands intracompany transferees were observed within OECD countries. This figure excludes the figures within Europe which is counted as a single area.

3. Innovation and Migration in economic Theory – A survey In the early literature on migration the topics of brain-drain where discussed in a human capital framework. Scott (1970, p. 273) summarizes the central argument: “The human capital approach automatically leads economists to compare brain drain to capital movements and form questions about preventing it.” The earliest theoretical works can be found in international trade theory, exploring whether and in what sense brain-drain is a problem.

Authors like Harry Johnson (1965) and later Grubel and Scott (1966) studied the positive and negative effects of moving scientists and professionals with respect to their country of origin.

On the one hand, it is argued that countries faced with emigration of their high-skilled labor force might reduce their funding of higher education (Regets 2001, p. 245). On the other hand, observing the success of emigrants raises the incentives of the natives for higher education, an effect in particular to be observed in developing countries.

Since the early 1980’s brain-gain and reverse-brain-drain issues attract increasing attention.

A possible negative impact of immigration for the host country, which has been discussed, is the crowding-out on the labor market of the native labor by immigrants. For example, Borjas (2005, 2006) argues that foreign students may crowd out native students from the best graduate schools. Regets (2001) is emphasizing a consistency problem in many of these political debates: If crowding-out effects are relevant and immigrants strengthen labor supply in the host countries, wages of high-skilled occupations decrease; from this follows lower incentives of the locals to invest in their human capital. At the same time, however, it is argued, that low-skilled immigration substitutes low-skilled natives and reduces wages at the lower wage levels. This will lead to stronger inequalities in income distribution. If both arguments are accepted, then the consequence is that high-skilled immigration reduces income inequality whereas low-skilled migrants increase the incentive for natives to invest in human capital. This effect is empirically not proven, but studies for the United States so far show that a higher proportion of foreign-born employees goes hand in hand with higher salaries (Regets 2001, p. 251).

In this discussion De Haas (2010) argues that the ambivalent view on migration is to be seen as part of a more general paradigm shift in social and development theory. Concerning the optimistic view migration is viewed as a form of optimal allocation of production factors (De Haas 2010), in particular in a strict neoclassical view. From late 1960’s the pessimistic view on migration is connected with debates on brain-drain effects. In this pessimistic perspective, migration increases inequalities (De Haas 2010). The empirical evidence, however, challenges both, pessimistic and optimistic views and ask for a new approach. Pluralist views on migration and development interactions such as the New Economics of Labor Migration (NELM) with its transnational perspective on migration and development offer such a new approach. In NELM the impacts of migration in a knowledge-based economy are emphasized.

The strengthening of knowledge flows and collaboration between heterogeneous agents facilitated by immigrants together with the linkages they create with universities and training centers allow expecting a strong return on their human capital with the persons becoming economically active.

In cases the emigration of high-skilled workers and students were considered a “loss” in the productive capacity to the sending country - at least temporarily - the emigration countries have implemented special policies such as restrictive, incentive and compensatory policies in order to counteract the potential brain drain (Brown 2000). However, the effectiveness of these strategies remains dubious because the increasing trend in high-skilled migration was not affected. Restrictive policies, designed to make emigration more difficult, are effective only temporarily, if at all. Incentive policies are not a real option in developing countries: they can offer neither salaries nor infrastructures which are internationally competitive.

Compensatory taxation (to be paid by the receiving country or the migrant) in order to compensate the loss to the sending country are also impossible: the loss cannot be measured in monetary terms.

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