Migration and economic development: The unintended...

CEDIS Working Papers | VARIA | ISSN 2184-5549 | Nº 6 | julho 2019

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Migration and economic development: The

unintended consequences for technological

innovation and, thus, the development of societies

arising from barriers to high-skilled immigrants

Sofia Nunes

ABSTRACT

Over the years, high-skilled immigration has been fundamental for the development of

societies, either from an economic or social perspective, but its value has been potentially

underestimated and neglected as a factor of utmost importance. In fact, numerous and

fascinating discoveries have been made by immigrants as it is the case of Scottish scientist

Alexander Graham Bell that created the telephone in 1876 while he was living in the United

States of America. However, a relatively recent wave of populism in different countries

around the world has appealed for anti-immigration policies, which generates controversy

CEDIS Working Papers | VARIA | Nº 6 | julho 2019

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as it raises several questions regarding its advantages and disadvantages. So, this

dissertation aims to understand the link between high-skilled immigration and technological

development, namely in advanced economies, and its impact in the development of

societies. For that matter, it was used an instrumental variable in the regression adopted,

in order to rectify eventual endogeneity problems in the high-skilled immigrants variable as

it might have a both way causation with technological innovations. Thus, the analysis done

has demonstrated that there is, in fact, a statistically significant relationship between high-

skilled immigrants and technological innovation. Placing more obstacles to the entrance of

talented non-natives will have negative consequences, namely with having less patent

applications by around 9%. On the other hand, it was also taken into account the impact that

this increase in the talent pool would have in the development of societies by doing a

multivariate regression with a quadratic transformation. Indeed, the results were that it was

necessary an employment rate of highskilled immigrants higher than around 81,67% to see

a decrease in income or wealth inequality. Thus, policymakers need to see the whole picture

when considering engaging in more restrictive immigration policies as there are

repercussions to it that can be sometimes overlooked.

1. Introduction

For decades, migration has been a topic of constant debate, namely regarding what should

be the best approach as it is a phenomenon that characterizes most societies. Both migrants

from developed and developing nations go to advanced countries, particularly those from

the Organisation for Economic Co-operation and Development (OECD), hoping to achieve


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a better life and have more opportunities1, but those from poorer territories have an even

bigger motivation as they have a bigger economic gap (OECD, 2001, p. 71). So, the pursuit

for a higher quality of life in advanced countries, for the most part, has increased economic

migration of both high and low skilled immigrants, which, in turn helps to turn around the

ageing trend that is currently happening in most developed countries (Niebuhr, 2006, p. 1).

Indeed, the impact that it has in the communities is often viewed just from an economic

perspective regarding wages and employment, but the fact is that high-skilled immigration,

especially, can potentially provoke profound changes in its development through

entrepreneurship and technology innovations. However, this effect is often underestimated,

as it can help not only the host country, but also the country of origin to be more prosperous.

After the World War II, the computer revolution marked the beginning of an era that

revolutionized the world and prompted globalisation, which increased the need for

specialised workers particularly in the OECD countries coming from both developed and

developing countries (Chiswick, 2005, p. 2). The internet period facilitated the connection

between countries either by having faster transportation or the propagation of information in

seconds, for example. So, this ease in movement from nation to nation and, with it, the

disclosure of the best opportunities worldwide made people prone to move around and

pursue their dream. But, economic globalisation and the emergence of international

institutions that regulate global trade, economic relations and international monetary

cooperation, such as the International Monetary Fund, the World Bank or the International

Trade Organisation, have fuelled the argument about the global “brain drain”2. Therefore,

this revolution made societies realise the need to constantly adapt and the importance of

1 Sen, A. (2009) considers that the search for a better quality of life at a worldwide level can also be viewed as a matter of justice, in the sense that justice is beyond fairness and that it should be interpreted at a global level and not only from the point of view of a particular society, namely a developed one (p. 56). 2 “Brain Drain” is understood as “the assertion that migration tends to strip the sending nation of all its best workers” (Boeri, 2012, p. 11).


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talent and specialised skills, namely the demand for specialised individuals with different

capabilities, reason why multiple countries are starting to understand the advantages of

having a friendlier policy towards high-skilled immigrants, as in those “with a degree or

equivalent qualification” (Gagliardi, 2015, p. 777), so that they would have a competitive

advantage worldwide. Indeed, from a traditional neoclassic perspective, seizing the chances

available in the market seem evident for an entrepreneur, foreign or not, especially with the

need for constant adaptation deriving from nonstop innovation, which, in turn, would

eventually equilibrate the market and, thus, benefit society (Kloosterman & Rath, 2001, p.

189). But, when an entrepreneur is an alien3, governments do not always see it from this

perspective and it is the national identity that usually comes to mind, or the change that

would happen to it. In fact, more restrictions are taking place as issues with the economic

perspectives of nationals and their national identity are getting more relevance, making

citizens unsure of the decision that should be made. And while most of the research made

on this topic is about the macroeconomic effects of migration, recent analysis has proven

that there are relevant positive spillover effects into society by the inflow of talented migrants,

namely from a demographic perspective, in which young migrants balance the demographic

transition of developed societies with an obvious impact, for instance, in financial

contributions to social security. The objective of this dissertation is to understand to what

extent high-skilled immigration has an impact on technology innovations and, thus, the

development of societies. So, it is organised as follows. Firstly, in section 2, it is going to be

done an overall revision of the literature regarding the relationship between specialised

immigration and innovation and its contribution to economic growth. Then, section 3

discusses the methodology used to estimate the effect in question and its limitations, while

taking into consideration two parts of the analysis: a first one to understand the actual impact

3 Immigrants are often referred to as ‘aliens’, not necessarily with a bad connotation (Carens, 1987).


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of high-skilled immigrants in technological innovation and a second part to comprehend its

impact in the improvement of a society. Finally, some recommendations are going to be

made in terms of the best approach for immigration policy, having the appendix more details

about the analysis done.

2. Literature Review

This section has the objective of going over key aspects of this topic, which were discussed

over the years by multiple authors, starting with explaining how high-skilled immigrant and

technological innovation are interconnected, followed by a description of its role in the

development of societies.

2.1 The alliance between immigration and technology:

In the last few decades, the United States of America (USA) has become one of the most

powerful nations around the world, owing it specially to its superiority in the scientific and

technological sector through the attraction of technological entrepreneurs, as Wadhwa, V.

(2012, p. 162) suggests. In fact, a great number of innovations that completely revolutionized

the world as we know it were the work of exceptional immigrants, from Alexander Graham

Bell, with the telephone, to Elon Musk, with PayPal and SpaceX (Wadhwa, 2017), having

these boosted the acquisition of “patents at double the rate of highly educated US natives”

(New American Economy, 2011, p. 7). According to the New American Economy (2011, p.


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7), an immigrant4 or its descendent create substantial new jobs, being responsible for more

than 40% of those in the Fortune 500 in 2010, which is why Tim Cook, Chief Executive

Officer of Apple Inc., admitted that “Apple would not exist without immigration, let alone thrive

and innovate the way we do” (Business Insider UK, 2017), having Microsoft Corporation

taken the same position (see Appendix A for more details about one of the leading

companies in technology, which had an important voice in the migration debate in recent

years). Therefore, companies have a unique position here as they can be the decisive factor

for a visa to be granted, namely in the case of the USA, in which these firms decide which

immigrants are more suitable to work there in order to sponsor them (Kerr, 2013, p. 17).

However, tech companies have started to protest against all the barriers in place as their

foreign employees contemplate moving to their countries of origin, which allows for these

countries to catch-up in the technological field (Warton, 2017). Wadhwa, V. (2012, p. 182)

argues that countries such as China and India are becoming prime competitors in the

scientific and technological market, whilst offering more attractive conditions to live and start

businesses. In the USA, almost two-thirds “of H-1B petitions approved in FY 2014 were for

workers in computer-related occupations” (U.S. Citizenship and Immigration Services report

to Congress, cited in Warton, 2017), so it is thought that if these restrictions take place, the

progress of tech industries would damper as these would seek the best conditions possible

and not necessarily give the jobs to American citizens (Warton, 2017). In fact, recent

immigration policies in the USA cause so much trouble in getting a visa that this nation is

not seen any more as having the best career opportunities for entrepreneurs comparing to

their home countries, where benefits and higher quality of life captivates them (Wadhwa,

4 Throughout the text, it is going to be assumed that “immigrants” refer to economic/employment-based immigration (to search for better work conditions or higher quality of life), although, in the international migration debate, it may also refer to family migration (to reunite families in destination country) and humanitarian migration (to those that were at risk in their home countries due to war, striking social conditions or political reasons) (Shachar, 2006, p. 150).


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2012, p. 441). This competition for global talent comes from the economic advantages that

it can provide to a nation as human’s aptitudes are distinctive and cannot be replaced easily,

making the countries consider different programs to attract the best ones and, thus, be at

the top of the race (Shachar, 2006, p. 152). So, immigration policy is no longer seen as just

revolving around domestic preferences, but rather combining it with the strategies of other

nations, although not necessarily from a collaborative perspective, but to have the upper

hand, as Shachar, A. (2006, p. 155) argues. However, Chellaraj, et al. (2005, p. 1) assumes

that the terrorists’ attacks of September 11, 2001, in the USA had a profound alteration in

the way immigration is dealt with, which also affects the rest of the world, being in permanent

discussion how open the borders should be. Indeed, a worry with “sovereignty and

protection of domestic labour markets, including wages of nationals, the sustainability of

social security systems and social cohesion” (OECD, 2001, p. 83) has started to change this

phenomenon, namely in the USA, as more restrictive immigration policies are taking place5,

not allowing the permanent capture of highskilled immigrants as much as before, especially

for those from STEM (Science, Technology, Engineering and Mathematics) backgrounds,

reason why this situation has been entitled as the “reverse brain drain” (Wadhwa, 2012, p.

162). However, the question regarding the differences between immigrants and natives

and, thus, their uniqueness in this sector may arise. Hart, D. & Acs, Z. (2011, p. 118) claim

that their background and experiences in different cultures give migrants the perception of

society in a different light and, with that, the awareness needed to detect the best

opportunities. So, it should not come as a surprise that “16% of high-impact, high-tech

companies” (Hart & Acs, 2011, p. 120) had, minimum, one immigrant as its founder. Even

regarding innovation at the university level, colleges have a huge role in attracting talents,

while linking individuals and organisations with open-minded environments (Florida, 2006).

5 In the USA, there has been a proposal to lessen the amount of H-1B visas given in the beginning of 2017,

which are destined for foreigners employed in a specialised occupation (Business Insider UK, 2018).


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The positive externalities that come from it should also be taken into consideration as it

becomes a more propitious climate for new ideas “coming from the re-combination of new

and pre-existent local knowledge” (Audretsch & Feldman 2004, cited in Gagliardi, 2015, p.

778). The brain drain from developing countries is usually a main argument that comes up

on the international migration debate, but there are two components that can undermine it.

Firstly, from an economic perspective, the remittances sent back to the home countries help

the migrant’s family to have a higher quality of life and even to invest in new properties and

businesses (Chiswick, 2005, p. 6). Indeed, the World Bank has concluded that “remittances

can be sizeable relative to per capita income in their home countries” (The World Bank,

2011, p. 16), which allows the local community to benefit from it. In addition, those that return

to their home nations after getting experience abroad will help towards the “brain gain” and

it opens the possibility of creating a relationship between richer and poorer countries, which

helps growing the economies (Chiswick, 2005, p. 6).

2.2 Boosting economies through immigration:

Nowadays, the idea of free movement of workers for those of specific countries is gaining

force. The case of European Union (EU) nationals travelling freely in the European

Economic Area is the most known since around half a century (European Commission).

Even emerging regions are starting to understand its benefits, reason why it was established

in 2015 the Association of Southeast Asian Nations (ASEAN) Economic Community which

has the intend of promoting the free flow of skilled labour (Association of Southeast Asian

Nations) and this is happening due to the increase in demand for these workers as the own

digital economy intends. However, different thoughts have put a damper in strengthening


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these ties, as it is the current case of the United Kingdom wanting to leave the EU, commonly

known as Brexit, which risks the mutual access to these markets, without knowing what its

real effects are going to be. So, the question arises if the countries that decide to leave the

free movement area, assuming here that this implies putting barriers to the entrance of non-

natives, will suffer in terms of growth, development and equality. While this is uncertain,

there have been multiple researches expressing the benefits of free movement, namely

regarding positive outcomes on wages and employment (OECD, 2012, p. 4).

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It is natural to question the repercussions that these flows of human capital have in society,

namely in the lives of the natives. Indeed, national security should not be put at risk for freely

opening the borders, being needed some restrictions in place to prevent this. However, there

are times in which these restrictions come mostly from fear, without the right information

backing it, which can undermine the prospects for the progress of a particular society.

Indeed, the present time is marked by the beginning of the “Fourth Industrial Revolution”, in

which both governments and businesses need to foresee potential risks and constantly

adapt to the endless changes (World Economic Forum & INSEAD, 2016, p. v). It is by

accepting that the world is changing with the information and communication technologies

(ICTs) that countries can grow the most (World Economic Forum & INSEAD, 2016, p. v).

But, all sectors of the economy need to be interconnected as it is mainly the “global IT

industry” that is going to provide the new technology for the other sectors, especially for the

government with its adaptation to the “Digital Era Governance”6 (Dunleavy, et al., 2007, p.

2). Thus, there is a big dependence on ICTs (as well as, in the near future, of robotics,

artificial intelligence or quantum computing, for example) throughout all the economy and

6 “Digital Era Governance” is viewed as the progression from the “New Public Management”, in which there is a deep connection with the private sector regarding the implementation of new systems and the presence of egovernment (Dunleavy, et al., 2007, p. 4).


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not acknowledging the promoters of these innovations can put a dent in the progress

achieved and the future of the country. Naturally, the progress of a society is normally looked

at from an economic perspective, but a social change also has to accompany it to actually

present results in its development. In fact, Jacobs & Šlaus (2011, p. 98) argue that it is the

unique capabilities of human capital that makes development sustainable in the long-term,

being indispensable for human to be concious and aware of their choices, such as the Social

Development Theory suggests. So, the main focus of policymakers should be the humans

and their exclusive skills as it is the engine for the viable development of societies. Indeed,

the New Growth Theory affirms that knowledge is the motor for economic growth, assuming

that its foundation is not technology but the mechanism behind it which produces unique

creations (Cortright, 2001, p. 2). So, Cortright, J. (2001, p. 25) believes that this knowledge-

based economy is basically a cycle of unlimited ideas and, thus, unlimited growth prospects,

needing, for that matter, the individuals that hold those skills. In fact, it has been argued that

if the innovation capacity is restrained, then productivity is going to be negatively affected

as “productivity growth (…) has been generated largely by advances in technology” (Basu

et al., 2001; Basu, et al, 2003; Gordon, 2004a, 2004b, cited in Chellaraj, et al., 2005, p. 1),

which was why the USA had a 34,7% GDP growth derived from IT industries in 1996, already

taking inflation into consideration (US Department of Commerce, 1998, cited in Pohjola,

2001, p. 270). Moreover, it is regularly undervalued the way that specialised immigration

can help economies, without the need for the usual new cuts or taxes, while boosting it as

it was already mentioned before (New American Economy, 2011, p. 5). Indeed, besides the

benefit of generating jobs and wealth, high-skilled immigrants build important ties between

host and home countries, which is an asset that other competitors do not have as, for

instance, a business relationship can be created without the language barrier (Saxenian,

2002, p. 28). So, immigration and economic development should be thought as

interconnected (Saxenian, 2002, p. 29). In fact, poorer countries have benefited from it as


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“many goods previously produced primarily by lower-skilled factory workers in the OECD

countries are now produced in less developed countries” (Chiswick, 2005, p. 3). Wadhwa,

V. (2012, p. 542) believes that these nations, which do not have their technological market

as matured, can attract their natives home by being a niche and not full of competitors.

Furthermore, it is often argued that immigration hurts employment opportunities for native

citizens and the fact that STEM graduates completely disrupt the job market does not help

to change this perspective. In fact, Borjas, G. (2005, p. 59) discovered that non-native

doctoral recipients had a negative impact in the earnings of their opposing workers. In the

same line of thought, Kerr, W. (2013, p. 16) assumes that older native employees have a

higher probability of being substituted by younger foreigners in STEM areas due to “higher

elasticities of substitution by age” in these fields. Thus, it was discovered that immigrants

are more inclined to graduate from courses with “quantitative and analytical skills” than

natives, whom prioritize “interactive and communication skills” (Peri and Sparber, 2001,

cited in Kerr, W., 2013, p. 16), dividing both groups even further. This was also demonstrated

by Hibbs & Hong (2015, p. 655) with the use of the Gini Index to show that there is an

increase in inequalities with a higher immigration flow. However, several reports contradict

this view. In 2011, the New American Economy (2011, p. 4) found that there was no evidence

backing it up, guaranteeing that high-skilled immigrants create more jobs in the economy

and that they have a bigger burden in taxes than benefits received, while also consuming

and investing more, thus, not undermining the rate of employment of native-born citizens in

the USA. Kahanec & Zimmermann (2014, p. 8) also proved the same result as they argued

that more high-skilled immigrants in society will lead to reducing the differences in wages

between citizens with different skills. So, these authors confirmed that there is a negative

relationship between inequality7 and specialised migration (Kahanec & Zimmermann, 2014,

7 In this dissertation, by inequality it is meant inequality in wealth or income and not regarding any social phenomenon.


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p. 9). And, although nowadays information is easily disseminated and, thus, new inventions

as well, the region with the breakthrough has a competitive leverage compared to the rest

of the world (Chiswick, 2005, p. 4). So, the usual argument that high-skilled immigrants take

the jobs of natives is often overrated as it is demonstrated by the testimonial of Bill Gates in

Congress in 2008, in which he declares that “H-1Bs have special, innovative skills and that

technology firms on average hire five additional employees to support each new H-1B

worker” (National Foundation for American Policy, 2008, cited in Doran, et al., 2014, p. 1).

Furthermore, the Compete America Coalition has estimated that about 500.000 jobs would

not be created in 2014 as a result of the limit of visas granted each year, being necessary a

reform of immigration policy, in order to continue being a global leader (Microsoft

Corporation Blog, 2014). Even though tech companies sponsor these specialised migrants,

in the USA, there are still a lot of restraints in getting a visa, namely due to the “per-country

limits”8, which means that Chinese and Indian immigrants face a lot more pressure in getting

the right to stay permanently compared to smaller countries (Smith, 2017).

3. Quantitative Analysis

The analysis done in this section is divided into two parts. Firstly, it is going to be studied

the impact that highly skilled immigrants have in technological innovation. Secondly, it is

going to be estimated the way that high-skilled immigration influence the development of

societies, namely through inequality. In order to do that, it is going to be explained the data

and methodology used, which has its foundation in past studies done by some of the authors

8 This limit imposes that there is a maximum of 7% of green cards granted for each country, no matter the dimension and population of it (Smith, 2017).


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cited, and the conclusions that can be taken from that analysis, while taking into account

possible limitations that may exist.

3.1. Analysis done by main authors:

Over the last decades, there has been some research dedicated to this subject. Indeed, the

New America Economy (2011, p. 15) used a reduced-form regression to estimate the impact

of immigration in the employment of US-born citizens, with state and year as fixed effects.

Adopting a Two-Stage Least Squares (2SLS)9, the main findings were that employment

rates got higher with immigrants having a higher educational level (New American Economy,

2011, p. 17). On the other hand, Kerr & Lincoln (2010, p. 486) decided to adopt a reduced-

form model to show the effect of immigrants admitted to the USA with the H-1B visa on

science and engineering (SE) employment and innovation, while taking into account the

dependency of the city on this visa program with an interaction term. This author concluded

that “a 10% growth in the national H-1B population corresponded with about a 0,5% higher

growth in total SE employment for each standard deviation increase in state dependency”

(Kerr & Lincoln, 2010, p. 475). Furthermore, Hunt, J. and Gauthier-Loiselle, M. (2010, p. 34)

determined that there was a growth of 9 to 18% in patents per capita with an increase in 1%

of foreign college graduates by doing a probit regression (estimating the probability), while

controlling for “field of study of the highest degree, the highest degree and demographic

variables”. Contrarily, Niebuhr, A. (2006, p. 7) uses R&D personnel, with a lag of 1 year, to

estimate its impact on patent applications, taking into consideration the Diversity Index10 and

9 It was assumed that immigration share was endogenous and, thus, there would be a bias. So, the number of immigrants in the population was used as an instrument. 10 This index is based on the share of foreign employees on the total of employees (Niebuhr, 2006, p. 5).


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the following control variables: ratio of service to manufacturing employment, number of

R&D staff at universities and polytechnics per inhabitant, the employment shares of small

and large firms, region type and share of high-skilled employees in total employment. Also

using patent applications as a proxy to innovation in Europe are Ozgen, C., et al., (2011, p.

10), who decided to use an instrument for immigration to estimate its impact on innovation.

So, the distribution of McDonald’s restaurants was the one chosen as an international

company, while controlling for “average population, GDP growth rate, regional specialisation

in services/industry ratio, stock of human capital in S&T fields in the regions”, which resulted

in evaluating that it is the differentiation between immigrants that significantly impacts

innovations (Ozgen, et al., 2011, pp. 14-16). Regarding the measurement of inequalities,

Kahanec & Zimmermann (2014) decided to use the Gini coefficient to estimate the

relationship with high-skilled immigration. For that matter, they decided to use an Ordinary

Least Squares (OLS) regression, accounting for share of postsecondary or higher

education, share of foreign labour force inflation rate, share of population 15-64 years of

age, unemployment rate, women’s unemployment rate, participation rate, women’s

participation rate, share of labour force in agriculture, government size and GDP per capita

(1000s USD) (Kahanec & Zimmermann, 2014, p. 4). This resulted in estimating that

“inequality decreases with a higher labour force quality” (Kahanec & Zimmermann, 2014, p.

9). On the other hand, Hibbs & Hong (2015, p. 656) contradict this finding by using a different

methodology as they came to the conclusion that immigration has a negative impact in

inequality. These authors decided to see the changes in the Gini coefficient by dividing

immigrant inflow by population in a certain metropolitan area and year, while taking into

account the manufacturing share and college-graduate share (Hibbs & Hong, 2015, p. 654).

3.2. Data used:


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Estimations in social sciences deal with various challenges, namely the difficulty in gathering

all the data required for the evaluation as it concerns humans. So, although the total number

of immigrants for each country and each year is known, the same does not apply to the

education level of these. In fact, Kerr, et al., (2017, p. 4) discusses precisely the deficiency

of migration data and the unsuccessful attempt of researchers in encouraging governments

in getting the necessary data, as it has implications in the policies adopted. In order to

overcome this obstacle, it was assumed that employment rates by place of birth and

educational

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attainment (25-64) would be a suitable proxy for high-skilled immigration as it demonstrates

those specialised migrants that are actively contributing to society. This data was extracted

from the OECD Statistics for a sample of 31 countries from 2000 to 2015 (Appendix B shows

the complete list of countries), having been selected only the data from high educational

attainment and foreign-born.


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Graphic 1: Average employment rates of high-skilled immigrants for some specific countries (%)

(Data Source: OECD Statistics)

As it can be seen by graphic 1, the average employment rates of high-skilled immigrants in

almost two decades has been relatively high in industrialised countries. This sample shows

that each nation chosen has a rate above 70%, with more than half of these having a rate

higher than 80%. The fact that the average rate does not change drastically from one

advanced country to another demonstrate the constant fight for specialised migrants, in

order to get the economic advantage. Indeed, graphic 2 displays the data compiled for all

the countries and years, in which we can see that the median is, approximately, 78%, while

25% of the sample is in between the rates of around 81% and 91% (fourth quartile).

However, it also reveals that there are outliers below roughly the 61% rate, which could be

explained by the lack of support from the local community to integrate these individuals,

assuming, of course, that we are dealing, in these cases, with immigrants that do not need

a job to get the visa to enter the host-country or that lost their job recently.


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Graphic 2: Overall employment rate of high-skilled immigrants (%) (Data Source: OECD Statistics)

On the other hand, it was already mentioned that the technological revolution had a deep

impact around the world, so it is only normal that this effect is displayed through the years

with the continuous appearance of new technologies. Thus, patents applications (residents)

was chosen as the variable capable of capturing technological innovations, such as multiple

researchers have previously done, as patents represent the right for the development of an

idea (World Intellectual Property Organisation). The data was obtained from the World Bank

– World Development Indicators from 2000 to 2015 for advanced economies (the list of

countries can be seen in Appendix B). This period shows the advancements in the industry

with the average patent applications going from around 11.000 in 2000 to approximately

14.300 in 2015, with a slight decrease in 2007 due to the economic crisis that affected the

world, as shown in graphic 3. However, after the financial world crisis in 2007, the number

of inventions increased significantly as there was the need for the improvement of all sectors


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of the economy. Furthermore, graphic 4 demonstrates the privileged position of the United

States of America with the highest average of patent applications of around 13%, which

illustrates one of the reasons for this country to be a dominant nation.

Moreover, the development of societies can be viewed through multiple and distant

perspectives, from an economic one to a social one. In order to measure this, a variable

often used is the Gross Domestic Product of a nation, but it was decided to use the Gini

Index in this case as it demonstrates the inequality that exists in a particular society through

the dispersion of income or wealth (OECD, 2006). Although there has been contradictory

research regarding the impact of inequality on economic growth, the International Monetary

Fund (2014, p. 26) has concluded that decreasing inequality leads to sustainable growth,

but extreme income or wealth equality will do the opposite. Therefore, this data was

extracted from the World Bank – World Development Indicators for 31 countries, which can

be seen in Appendix B, for the period between 2000 and 2015. As it can be perceived by


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graphic 5, inequalities have been rising throughout the years as the average Gini coefficient

went from around 31,411 in 2000 to approximately 32,9 in 2015. This increment could, of

course, be due to the economic crisis that affected the world in 2007 as higher taxes and

more unemployment took its told in the wealth of individuals, which is precisely shown by

the values above the line in the graph during that period.

Graphic 5: Average Gini Index over time (Data Source: The World Bank – Word Development

Indicators)

3.3. Methodology:

3.3.1 First part of analysis:

11 A coefficient of 0 would mean that there was perfect equality, whereas 100 represents perfect inequality (OECD, 2006).


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As it was mentioned before, multiple authors used instrumental variables (IV) for their

analysis as it was thought that high-skilled immigration had endogeneity issues. Therefore,

the methodology chosen in this dissertation for the first part of the analysis is mainly based

on the work of Ozgen, C., et al., (2011) with the use of an IV model to understand the impact

of specialised immigration in technological innovations, assuming that this last one could be

captured in patent applications. The main problem regarding measuring the effect of

immigration in innovation is the fact that what attracts the most specialised migrants to a

specific territory could be the benefits brought by innovation itself as it stimulates the

economy, in terms of innovation centres and higher incomes, for instance (Ozgen, et al.,

2011, p. 10). It was discussed previously that the number of McDonald’s restaurants was

thought to ascertain the openness of a society and, thus, the residence of immigrants,

without having that much connection with innovation (Ozgen, et al., 2011, p. 10). Therefore,

and going with the same reasoning, it was assumed that the attitudes towards immigration

would reflect the openness of the nation, having been discussed by Roots, et al., (2016, p.

2) the measurement of this by using social surveys.

So, the instrument selected was the variable ‘Immigrants make country worse or better place

to live’ from the European Social Survey, circulated every two years from 2002 to 2016,

which was used for most countries (Appendix B has the full list of countries). By

instrumenting highskilled immigration with this exogenous variable, it is presumed that the

potential endogeneity bias is dealt with. A favourable attitude towards immigrants would

supposedly make the region more prone to accepting them, especially in terms of the policy

adopted without as much restrictions, while not having a direct effect on patent applications.

This variable, which is expressed as a percentage of the total number of responses,

contained answers from 0 (worse place to live) to 10 (better place to live), having been

extracted just this last result as it expresses the unambiguous opinion of the citizens. For

the case of the United States of America, this data had to be selected from the General


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Social Survey, in which there were only the years 2004 and 2014 available. In order to have

homogeneous data for this variable, it was necessary to convert it to a percentage by

dividing the actual answers by the total of cases. On the other hand, there was the need to

take into consideration the factors that can also impact patent innovations, in order to control

these. The Innovation Policy Platform argues that being able to get financial means is

fundamental for the creation of innovation, which depends on the funding provided either

privately or publicly, as well as the policy framework, markets and competition, as the

economic environment defines how prosperous innovative minds can be by defining

instruments that can preserve its interests. Thus, the following variables were treated as

control variables, so that the economic system would not bias the final results: New

Businesses Registered (number), Gross Domestic Product (GDP) per capita growth (annual

%), Total Researchers (Full-time equivalent) and Gross Domestic Expenditure on Research

and Experimental Development (GERD) as a percentage of GDP. The data was extracted

from 2000 to 2015 for 31 countries, being the first two from the World Bank – World

Development Indicators and the others from OECD Statistics.

Therefore, the specification of the model used with fixed effects is the following:

𝑥1𝑖t-1= γ𝑖 + δ1IV𝑖 t + δ2𝑥2𝑖𝑡−1+ δ3𝑥3𝑖𝑡-1+ δ4𝑥4𝑖𝑡+ δ5𝑥5𝑖𝑡-1+εit (I)

ln( 𝑦𝑖𝑡)= 𝛼𝑖 + 𝛽1𝑥1𝑖t-1 + 𝛽2𝑥2𝑖𝑡−1+ 𝛽3𝑥3𝑖𝑡-1+ 𝛽4𝑥4𝑖𝑡+ 𝛽5𝑥5𝑖𝑡-1+uit (II)

Although it is demonstrated the two stages of the IV analysis12, specific software made it

possible to do it in one single step, so as to have the right standard errors. So, 𝑦𝑖𝑡 is

patents applications (residents) in country i at time t, 𝑥1𝑖𝑡-1 is employment rates by place of

birth and educational attainment (25-64) in country i at time t-1, which was assumed to be

12 The second stage uses the predicted values of 𝑥1𝑖𝑡-1, obtained through the first stage with an OLS regression, to estimate the dependent variable.


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correlated with the error term εit, being necessary, therefore, to be instrumented by IV𝑖 t ,

which is immigrants making country worse or better place to live in country i at time t.

Furthermore, 𝑥2𝑖𝑡−1 is the New Businesses Registered (number) in country i at time t-1,

𝑥3𝑖𝑡−1 is the Total Researchers (Full-time equivalent) in country i at time t-1, 𝑥4𝑖𝑡 is the

Gross Domestic Expenditure on Research and Experimental Development (GERD) as a

percentage of GDP in country i at time t, 𝑥5𝑖𝑡−1 is the Gross Domestic Product (GDP) per

capita growth (annual %) in country i at time t-1, uit is the error term not correlated with 𝑥1𝑖𝑡-

1 and γ𝑖, δ1, δ2, δ3, δ4, δ5, 𝛼𝑖, 𝛽1, 𝛽2, 𝛽3, 𝛽4, 𝛽5 are unknown parameters.

It was decided to log the dependent variable in order to improve the model fit, making it also

more suitable to interpret the final results. On the other hand, it was presumed that

employment rates by place of birth and educational attainment (representing high-skilled

immigration), new businesses registered, total researchers and GDP per capita growth

needed a lag of one year as each one had a memory that might affect the t period. It is

shown in table 1 the summary statistics of each variable as follows.


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Table 1: Summary Statistics of model I/II

3.3.2. Second part of analysis

As it was seen above, the main authors researching this topic decided to use the Gini Index

to explore the question of the development of societies through the presence of inequality

in a society. Indeed, it was assumed that the more developed societies would display lower


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levels of inequality compared to developing nations and vice-versa. For that matter, it was

decided to go with the same approach, in which it was tested the impact of high-skilled

immigrants in inequality with the use of the Gini Index in an OLS multivariate regression.

The various contradictory research found made it crucial to think about the possibility of

creating a new variable with a quadratic transformation regarding high-skilled immigrants13,

in order to capture the distinct effects. Just as in the first part of this analysis, employment

rates by place of birth and educational attainment is considered as a proxy for highly skilled

immigrants for lack of superior data in this multivariate regression. Furthermore, basing this

model on the work done by Kahanec & Zimmermann (2014), it was decided to use Gross

Domestic Product growth (annual %) and Urban Population (% of total) as control variables,

so that possible external circumstances would not influence the real impact calculated.

These two variables were selected from the World Bank – World Development Indicators

for the countries explicit in Appendix B and from 2000 to 2015.

Thus, the model used with fixed effects is subsequently:

𝑦𝑖𝑡= 𝛼𝑖 +𝜌𝑦𝑖t -1+ 𝛽1𝑥1𝑖𝑡+ 𝛽2(𝑥1𝑖𝑡)2+ 𝛽3𝑥2𝑖𝑡-1+ 𝛽4𝑥3𝑖𝑡 (III)

Accordingly, 𝑦𝑖𝑡 is the Gini Index (World Bank estimate) in country i at time t14, 𝑥1𝑖𝑡 is e

mployment rates by place of birth and educational attainment (25-64) in country i at time t,

𝑥 2𝑖𝑡−1 is the Gross Domestic Product (GDP) per capita growth (annual %) in country i at

time t -1, 𝑥3𝑖𝑡 is the Urban Population (% of total) in country i at time t and 𝛼𝑖, 𝜌, 𝛽1, 𝛽2,

𝛽3, 𝛽4 are unknown parameters. Furthermore, it was introduced a lag in the dependent

variable Gini Index (% of total) as it was believed that there is a memory that could affect

the year t, which was the same for GDP per capita growth with the inclusion of a lag of one

13 This new variable was created by squaring employment rates of high-skilled immigrants 14 At the right side of the model, the same variable appears at time t-1.


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period, because of the assumption that it would not produce effects in that same year. Table

2 specifies the summary statistics of each variable used in the model.

Table 2: Summary Statistics of model III

3.4. Statistical Results:

Regarding the first analysis done, its conclusion is that there is statistical significance in the

link between patent applications and employment rates for highly skilled immigrants, in

which a higher number of specialised immigrants increases the amount of patents. As it can

be seen by table 3, the results for model 2 are already statistically significant without the use

of an instrument (OLS estimation, naïve in this case as it seems to be biased), but

instrumenting high-skilled immigrants in the final model proved to be a better fit as it

increased confidence levels to 98,5% and reduced bias, which increased the suspicion that

there is, in fact, a causation in both ways, meaning that places with a higher technological

innovation would also attract more specialised migrants. Although it is not possible to test


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the exclusion restriction of the instrument, as in effecting patent applications only through its

impact on highly skilled immigrants, this instrument proved to be relevant as it was

statistically significant in the first stage of the Two-Stage Least Squares (2SLS) Regression

at a 99,4% of confidence level.

Table 3: Estimations of model I/II

Thus, it was estimated that with employment rates of 100% there would be around 9% more

patent applications as it can be seen by graphic 6. This result also demonstrates the impact


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it has in society. Putting barriers to highly skilled immigration would slow down the progress

already achieved by advanced economies as the competitive edge would be lost. Thus, this

would mean that about 9% of patents applications would be lost without the employment of

specialised immigrants, consequently impacting the economic development of societies,

which would suffer with deeper restraints to migration. This result is just being demonstrated

by an economic perspective, but it is also important to take into account the positive

consequences that this have from spillover effects. Developed countries are being

characterized as having older citizens as a big part of its population, which do not contribute

actively for the economy and, thus, there is a pressure to have policies in place to aid these

individuals and counterbalance this. In fact, the OECD has predicted that active population

is going to go down by 12% in about 10 years in the European countries (2012, p. 3). So,

specialised immigrants would help balance this demand with their active contribution

towards society, while also connecting the host and home countries with the possibility of

having flows of know-how and money between these.

Graphic 6: Estimated relation between patent applications and employment rates of highskilled

immigrants (other independent variables are hold at its mean). *Instrumented by Immigrants make


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country worse or better place to live. (Data Source: The World Bank - World Development

Indicators, OECD Statistics, European Social Survey and General Social Survey)

On the other hand, the second part of the analysis resulted in the conclusion that there is,

in fact, a statistically significant link between the economic development of a society and

highskilled immigrants. As it was mentioned before, there has been contradictory views

regarding this effect and the outcome here demonstrates precisely that as it can be seen by

table 4 with the last model being the one with a higher confidence level of more than 95%,

which was also the one adopted (Appendix C displays the normal distribution of the error

term, which goes in accordance with the OLS assumptions). This quadratic transformation

is proof that there is a different impact in society depending on the number of specialised

immigrants employed. Thus, inequality rises as a consequence of lower levels of

employment of migrants until a point in which it changes directions and starts to decrease

due to the higher talent pool. This shift goes according to previous research, the only

difference being that it was not considered a linear relationship in here and, instead, it was

took into account the possibility of both perspectives of its effects being correct.


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Table 4: Estimations of model III

Consequently, graphic 7 displays this relationship. The Gini coefficient goes from around

29,6 to around 32,1 when the employment rate of high-skilled immigrants is in between 50

and 81,67%15 approximately, which means that inequality in total rises when these foreign

workers are not employed. As these immigrants contribute considerably to taxes and social

security, this increase in inequality might not be that significant as inequality is relative to a

baseline and if the upper income or wealth grows relatively more than the lower income or

wealth, the final equation will be an increase of inequality, however with an increase in the

15It was calculated the turning point (vertex) with the use of the derivative of regression III, as demonstrated in

the following expression: 𝑥1= - 𝛽1 / (𝛽2 * 2) = -0,3740591/(-0,00229*2) » 81,67


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quality of live. On the other hand, the situation changes after the turning point of 81,67%, as

higher employment rates will decrease inequality. Although the changes in the coefficient do

not seem that significant, the reality could be different. Thus, if there are not at least 81,67%

of highskilled immigrants employed, this is going to manifest itself in inequality, just as

common sense suggests. Of course, in most countries, a work placement is needed in order

to be allowed to stay in a country and get the visa. But, for those that have the intention of

being entrepreneurs that is not the case. Furthermore, higher economic inequalities are

often correlated with more poverty and, thus, it can put more pressure in the government to

handle crime prevention and public health, which would restrain economic growth. So,

immigration policies needs to take this into account and make sure that the right conditions

are in place to not deepen inequality between citizens, which would compromise the

sustainable development of societies.

Graphic 7: Estimated relation between the Gini index and employment rates of high-skilled

immigrants. *other variables are hold at its mean. (Data Source: The World Bank - World

Development Indicators, OECD Statistics)


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3.5. Limitations:

In this section, it is going to be explained some of the flaws that the analysis in question

carries. Firstly, regarding the initial one, not having data about high-skilled immigrants for

each country and year is one of the main limitations of this research as it is its central focus,

being necessary to counterbalance this with the use of employment rates of specialised

migrants, which does not reflect exactly the same effect. Additionally, the country in which

there was the application for the patent may not be the location experiencing the highest

repercussions of it, as it was also mentioned by Ozgen, et al. (2011, p. 7). Furthermore, the

fact that the European Social Survey just happens every two years makes the sample for

model I have less observations and, thus, less statistical power, which is the same for the

General Social Survey, in the case of the USA, that only has data for two years in a period

of a decade and a half. Moreover, in past research, the diversity effect is also taken into

account, namely in the analysis done by Ozgen, et al., (2011, p. 9), in which this

fractionalization index captures the probability of belonging to different cultural backgrounds.

However, it would not be feasible to do so in this case, because of the complexity of the

calculations as it uses the Herfindahl index of concentration (Ozgen, et al., 2011, p. 9). On

the other hand, the second part of the analysis also has the problem regarding the data for

high-skilled immigrants. Naturally, this may compromise the conclusions taken from it as the

data is referring to the employment rates of talented immigrants and not the own individuals.

Although it is expected for the overall results to be the same, the predicted outcomes could

change. Furthermore, it is only tested its impact in the development of a society through the

perspective of income or wealth inequality, while many other factors are not being taken into

account. Indeed, the focus has been only in differences in the labour supply and not in the

changes in spending that inevitable comes attached to it, which could have repercussions


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on the impact already mentioned, just as Hibbs & Hong (2015, p. 7) also note in their

analysis.

4. Further Discussion and Recommendations:

As it was seen before, it is in our interest to advocate for a friendlier immigration policy and,

for that matter, it is going to be enumerated a few approaches for that purpose. In this

discussion, it is adopted a “realistic morality”16, which suggests that immigration policy has

to take into consideration the pressure that this flow exerts on the native citizens as “a

morality that requires people to sacrifice what they regard as basic interests (…) is bound to

fail as a guide of action” (Carens, 1996, p. 163). Although it is advocated a more liberal

immigration policy, limits for open borders can be put in place when national security is at

risk and basic human rights are endangered, which is the case with the prevention of

terrorists attacks.

Indeed, the birth place can be considered to be the lottery of life (Shachar, 2009). It does

not depend on a concrete action of any person to be born in a wealthy country or in a wealthy

family. This might even be considered as a first injustice, for which no one can be

accountable. And to try to solve the problem of a just society that gives a fair opportunity to

everyone, independently of the birth place, John Rawls (1999) makes the philosophical

suggestion, through his two principles of justice, of how a well-organised society can raise

the position of the worst-off group, group that did not have the same luck in life17. This same

16 This is seen as the approach to close the gap between the “ought” and the “is”, as in to apply the ethical standards to public policy (Carens, 1996, p. 157). 17 “Two principles of justice. First: each person is to have an equal right to the most extensive scheme of equal basic liberties compatible with a similar scheme of liberties for others. Second: social and economic inequalities


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reasoning might be extended from a particular society to the relationship between different

nations, so that people are able to have the same equality of opportunity, at least the ones

who feel that are entitled to it, such as high-skilled immigrants. Also, the argument that

immigrants might distort the national identity and traditional culture of a community is

questionable, as most countries nowadays have immigrants and, thus, the very own

definition of the term “national identity” does not uphold the purpose intended.

So, sensible rules need to exist without compromising the economic prospects of a particular

society. But, it is the overall mentality of the citizens that sometimes push the acceptable

limits as racial discrimination and xenophobia seem to plague and influence the more

restrictive immigration policies, as it was the case when the current President of the United

States of America Donald Trump mentioned that “open borders means crime” (The

Economist, 2018) (Appendix D exhibits an extract from the mentioned article). Thus, it is this

way of thinking that needs to change. However, the reality is that this is extremely difficult

and a long-term process. So, more practical and realistic measures need to be put into

place.

On the other hand, it should be noticed that, in this new millennium, with the changing global

economic landscape, Asian countries are developing very consistently. China, for instance,

intends to be not only the factory of the world but also the worldwide heart of innovation (Bel,

2015, p. 34). According to a report of PricewaterhouseCoopers (2009, p. 2), China is

transforming itself in the world base of research, innovation and development due to the

structural change from a producer country to a society committed to innovation. Moreover,

both China and India, with more or less 1.4 billion people each (Worldometers, 2018), have

a clear population advantage, meaning that the pool of high-skilled innovators is, at least in

principle, much larger than that of developed countries such as the United States of America

are to be arranged so that they are both (a) reasonably expected to be to everyone’s advantage, and (b) attached to positions and offices open to all” (Rawls, 1999, p. 53).


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or the European Union. It might mean that for western developed countries to compete in

the future global economy, they should tackle the issue of allowing qualified immigration,

and therefore, to promote faster technological innovation or the competitive edge will be lost.

Thus, over the years, several politicians in the USA have proposed to create a visa specially

designed for foreign entrepreneurs, but it has not been successful so far (Wadhwa, 2012, p.

967), which is not the case in other countries of the world, such as the United Kingdom, for

instance, which has this kind of permit (UK Government, 2018). Wadhwa, V. (2012, p. 981)

believes that there should be no quota restriction based in the country of origin as it is not

fair for states with a larger population and, thus, a higher talent pool, as it is the case of

China and India, in comparison with those with less citizens. This would mean that the

process is solely based on the skills of immigrants. In fact, the Congressional Budget Office

(Nonpartisan Analysis for the U.S. Congress) has estimated in 2014 that a change to the

USA’s visa program would have positive repercussions, namely the increase of revenues in

118 billion dollars during a decade with the growth of the labour force. With this in mind, it is

also important not to forget the role that families play, being fundamental not to put added

restraints to the unification of families. So, giving permission to the spouse and children to

go to the host country should also be kept in mind.

Moreover, policymakers should look at the bigger picture and strategically plan the course

of action as it is necessary to take into account the best conditions to attract and retain these

immigrants, because it is not only the permission to stay that counts but also their quality of

life. So, helping them to integrate into society by organising explicit programs with the

community would encourage this process, which would also endorse respect among the

different ethnic groups. Furthermore, another measure would be to have specific workers

dedicated to gather information about the progress and productivity of high-skilled

immigrants to understand the real impact that it has in the economy, in order to actually

make special schemes dedicated to it.


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5. Conclusion:

International flows of people have always been a controversial topic in policy debates as

there is not a clear optimal solution that would not benefit one side more than the other.

Indeed, worries with national security and identity can influence the opinion regarding

opening the borders of a nation, reason why we have been witnessing more restrictive

immigration policies around the world. Although it is necessary to take this into account, it is

also important to understand the benefits that come with migration as it is the only way to

make an informed decision without bias affecting it. This prejudice can harm societies

without the citizens even realising it. But, from a normative perspective, the place of birth of

a particular citizen is pure luck, which justifies the search and, thus, the permission to obtain

better work prospects and a higher quality of life, namely in more advanced societies. So,

immigrants have been a constant in these nations as the demand for skilled human capital

has been increasing over the years due to the perpetual change in society as a result of

technological innovations. However, it is frequently undervalued the impact that these high-

skilled immigrants have in the progress of technology, which also has repercussions in the

improvement and growth of nations.

On the other hand, almost every sector in society is being affected by technology, which

involves adapting to the changes that are constantly happening. For that matter, more and

more specialised workers are needed, independently of their nationality and background.

Naturally, tech companies have understood this and are competing with each other to attract

and retain the best of the best, reason why these organisations are willing to sponsor

immigrants for their visa as they know the competitive advantage that it would bring,

especially those in STEM fields. These individuals have, most of the times, skills that are

treasured, skills that cannot be found elsewhere as it is their background and individual

experience that shapes it. So, these unique talents allows them to look and find niches that


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could escape the untrained eye, which explains why there are several entrepreneurs

immigrants and why multiple big tech companies nowadays have one of their founders as

such. However, recent worldwide nationalist promulgation threats to undermine this trend of

technological accomplishment, which can stagnate the development of societies. Indeed,

the research done in this dissertation with the adoption of an instrumental variable model

allowed to come to the conclusion that there is a statistically significant and positive

relationship between high-skilled immigrants and technological innovations. So, putting

barriers in the entrance and permission to live in a particular country to talented immigrants

will decelerate the growth of innovations by approximately 9%.

Furthermore, there are various theories that believe in the connection between the three

factors: high-skilled immigrants, technological innovation and economic development. In

fact, the New Growth Theory presumes that it is the knowledge that is behind these

innovations that allows for prosperity to emerge and, over the years, there has been

evidence of an increase in productivity with the adoption of technology in organisations,

boosting the economic prospect of societies. So, this becomes a cycle. More specialised

immigrants modernizes environments and all its sectors. However, the question about its

impacts in the natives can appear, being necessary to see the advantages and

disadvantages towards them. Although, there is the usual argument that immigrants take

the jobs of the natives, there are several reports that contradict this view, as far as creating

even more opportunities for them, while supporting a big part in taxes and social security

which, in turn, helps to contradict the ageing trend that exists in developed countries. The

conclusion of the second part of the analysis done in here expresses both perspectives. The

multivariate quadratic regression allowed to derive that high-skilled immigrants would need

to have an employment rate higher than, approximately, 81,67% to not increase income or

wealth inequalities. But, more specialised immigrants employed suggest less income or


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wealth differences between citizens and, as inequality has been associated with stagnated

economies by some authors, this would stimulate economic development.

Therefore, it is necessary to understand the consequences of restraining the flow of talented

migration as it is a subject that can sometimes be overlooked, which could be particularly

damaging for the competitive edge that advanced nations have. So, less restrictive

immigration policies have been advocated by tech companies namely in the United States

of America as it is becoming clear to them that their country is losing its position at the top

for emerging competing nations, such as India and China. Facilitating the visa process and

allowing for different types of permissions, such as a visa solely for entrepreneurship, would

smooth the overall movement, without interfering with national security. But, it is necessary

to have better data regarding high-skilled immigration in order to have a proper debate and

so that policymakers can make informed decisions based in accurate research.

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7. Appendices:

7.1. Appendix A: The case of Microsoft Corporation

The computer revolution originated a true “Fourth Industrial Revolution” in the beginning of

the 21st Century, namely artificial intelligence (AI) as well as robotics associated with the

general use of the Internet of Things are changing dramatically industrial production,

technology development and even labour relations (World Economic Forum & INSEAD,

2016, p. v). Thus, in order to understand what actually happens inside the IT industry, it was

decided to look deeper into the case of Microsoft Corporation. This American corporation

specialises in computer software systems, gaming, mobile phones, among many others

(Britannica, 2018), being considered to be one of the top 25 technological companies of the

world, raking 3rd in 2017 by Forbes. Founded in 1975 by Bill Gates and Paul Allen, it has

an enormous influence around the world, using this leverage to advocate for some decisive

debates, namely about immigration in the USA as this subject not only influences millions of

people and the economy, but also affects the company itself and its business (Smith, 2018).

Indeed, Brad Smith (2018), the Chief Legal Officer (CLO) of Microsoft, believes that the

achievements of this company are due to immigration as it attracts the best talents from

around the world. The ongoing debate about migration is an important issue for Microsoft

Corporation, coming directly from the top as its current Chief Executive Officer (CEO) is

Satya Nadella, an Indian immigrant that went to America to get higher education in a STEM

subject (Bloomberg, 2017).

Indeed, many of the employees that work at this organisation have, or are in the process of

getting, green cards, but the uncertainty that revolves around the visas makes these

migrants unsure about their future (Smith, 2018), as was the case when, in 2017, the block


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to enter the USA for 90 days for citizens of countries such as Iran and Iraq was announced,

in which help was offered by Microsoft to the 76 employees with a temporary work visa that

were in these conditions (The Seattle Times, 2017). Despite the hindrances, the number of

H1-B visa applications approved by Microsoft increased from 1,145 in 2016 to 1,479 in 2017

as the demand for talent was not fulfilled by natives (Statista, 2018, cited in Business Insider

UK, 2018). In 2017, Microsoft Corporation was ranked number 9 in the list of patents

creations with 2.601 patents produced, an increase of 1,7% from the year before (Intellectual

Property Owners Association, 2018), having been estimated that, in 2016, each employee

produced 725.403 U.S. dollars of revenue annually (Statista, 2018). So, from the 77.829

employees in the USA (Microsoft Corporation, 2018), there were 15.000 who were

dependent on a work visa in 2017 (IT Showcase Blog, 2018), which would mean that these

immigrants generated around 906 millions just in one month18.

Moreover, emerging countries are becoming a powerful competition in the tech industry.

Indeed, by integrating the World Trade Organisation in 2001, China has agreed to promote

respect for patent rights as well as prohibiting illegitimate technology transfer, thus, creating

a “level playing field” between China and other global competitors (European Commission,

2018) and India, for instance, has a fast-growing biotech sector that is growing worldwide

(Rezaie, et al., 2012, p. 4). So, these countries are trying to bring their talented natives home

with the promise off multiple benefits, being necessary for advanced countries to take this

into account if they do not want to lose the competitive edge.

18 Assuming that the estimation would be the same for 2017.


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7.2. Appendix B: List of countries

1. Austria

2. Belgium

3. Canada

4. Czech Republic

5. Denmark

6. Finland

7. France

8. Germany

9. Greece

10. Hungary

11. Iceland

12. Ireland

13. Italy

14. Luxembourg

15. Mexico

16. Netherlands

17. New Zealand

18. Norway

19. Poland

20. Portugal

21. Slovak Republic

22. Spain

23. Sweden

24. Switzerland

25. United Kingdom

26. United States of America

27. Chile

28. Estonia

29. Israel

30. Slovenia

31. Turke


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7.3. Appendix C: Error’s distribution of model III

The graphic below shows the normal distribution of the error, which goes in accordance with

the assumptions of the OLS regression.

Graphic 8: Distribution of the error for model III


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7.3. Appendix D: Extract from The Economist’s article

“America could learn from the EU’s open borders

Only libertarians advocate completely free movement, writes Will Wilkinson, yet there is

much to be said for a degree of openness in immigration policy

(…) Steve King, a hardline anti-immigration congressman from Iowa, maintains that

Americans “face an identity crisis, as open-borders politicians are seeking to ‘fundamentally

transform’ our nation through mass immigration policies". And then, of course, there is

President Donald Trump. “The Democrats are for open borders, which means crime,” Mr

Trump recently opined. “It's not a question of, like, what do you think it means. Open borders

means crime.”

You may not be shocked to learn that Mr Trump inverts the truth. Democrats are not

principled advocates of open borders and free movement. Immigrants are less likely to

commit crimes than native-born Americans. And there is definitely a question of what “open

borders” means.

Out of the mouths of Messrs King, Miller and Trump, “border” basically means “the purity of

the national stock” and “open” basically means “defilement.” “If we don't have borders,” Mr

Trump has said, “we don’t have a country.” As it happens, America does have borders, and

is a country. What Mr Trump means, and what his supporters hear, is that a country is a

people of a unified ethnicity, and a drift towards a different, more varied complexion must be

stopped.

This confusion of immigration policy for demographic social engineering has led Mr Trump

to split up families, jail toddlers and terrorise immigrant communities.


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But it is important to see that demographic change is only incidentally a matter of “borders”.

If ethno-nationalist population control is the policy goal, then the presence of an already

large multicultural population and declining white birth rates are bigger obstacles than

immigration.

(…) As the EU makes plain, the notion of “open borders” is not all or nothing. Legal entry

and residency can be open to citizens of some countries but not to others. The French are

free to waltz into Spain, but Moroccans aren’t. Moreover, it is a mistake to conflate a

permissive immigration policy with “open borders”, since selective openness is compatible

with overall restrictiveness. A border that is entirely open to the citizens of a few nearby

countries can be, on the whole, less porous than one than that is open to anyone anywhere

who ticks the right boxes. Immigration policy can’t shut down streams of human traffic.

Instead, free and prosperous liberal societies require clear rules that respect and regulate

inevitable migration flows.

An open border between Mexico and America, on the model of the open border between

Spain and France, could fix the problem. It would bring peaceful and productive labour

migration within the rule of law, reduce exploitation and abuse by employers and human

smugglers, and more speedily shrink the gap in living standards that, more than anything,

draws Mexicans north.

Aside from a handful of libertarian idealists, no one is proposing to open borders everywhere

to everyone. But to defend the existing liberal order is to stand up for multicultural societies.

And according to Gallup, a record high 75% of Americans now say immigration is a good

thing. This shift in opinion, should it last, could open up new opportunities for liberalising

immigration reform. A sane debate is impossible, however, if the public mind continues to

be polluted by nativist misdirection.” (The Economist, 2018)

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