The Impact of Immigration and Cultural Diversity on Innovation and Economic Growth

This paper explores the impact of immigration and cultural diversity on innovation and economic growth. It discusses the role of immigrants in boosting international trade, increasing domestic savings, and fostering innovation. The benefits of immigration on the economy are also highlighted.

Running head: ECONOMICS
Economics
Name of the student
Name of the university
Author note

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Table of Contents
Title............................................................................................................................................3
Research questions.....................................................................................................................3
Literature review........................................................................................................................3
Introduction................................................................................................................................3
Immigration boosted the performance of international trade.....................................................4
Migration help to increase the domestic savings.......................................................................4
Links between the presence of foreigners and innovation.........................................................5
Cultural diversity........................................................................................................................6
Cultural diversity and economic growth....................................................................................6
Past exposure to migrants known to determine he earnings growth..........................................7
Benefits of immigration.............................................................................................................8
Reference list............................................................................................................................10

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Title
The impact of immigration and cultural diversity on innovation and economic growth.
Research questions
 Are the regions with large number of immigrants in the population more innovative in
nature?
 Does immigration help in innovation and economic growth of a country?
 Does immigration affects the international trade?
Literature review
In the paper “Impact of migration on economic and social development”, it states
about the impact of migration on the economic and social development. It have been found
out that migration can lead to increase in income and reduction of poverty. It also improves
health, development of the growth of economy and also lead to improved educational
outcome.
Introduction
Immigration is very important for boosting economic growth. They also have a
positive effect on the productivity as well as on the economic growth. The highly educated
immigrants will be contributing positively on the economic growth. Immigrants have also
known to boost the performance of the international trade which helps in innovation. They
help in expanding the economy by paying taxes and also funds government actions by
building roads, modernizing water systems. Increase in number of immigrants also leads to
increase in investments as they are known to expand the productivity capacity by building
more establishments (Bosetti, Cattaneo, & Verdolini, 2015). The openness of America to

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immigration have enriched its culture and have expanded the economic opportunity and also
enhanced its influence in the world. The number of working population can also be increased
by increasing immigration. Some of the studies have also suggested that immigration not only
boost economic growth but also leads to a positive impact on the wages of the native born
workers
Immigration boosted the performance of international trade
The paper “the effects of immigration in economic growth” analyses the impact of
immigrants, as workers have showed that the firms have started to trade with the countries of
their origin. The Swedish data have showed that the skilled immigrant employees are very
effective as they are known to boost the export performance of the country. The effect of
immigrants on exports is usually only found to affect the exports of their countries of origin.
The recent studies have also showed that by boosting the firm’s productivity, the skilled
immigrants can also increase their productivity (Kerr & Turner, 2015). The skilled
immigrants can also affect trade by allowing more global mind set among its workforce due
to ethnic diversity. Therefore, the skilled immigration will affect the performance of the firm
not only through the cost channel.
Migration help to increase the domestic savings
Immigrants are known to increase the domestic savings and also improve financial
intermediation. The research from Mexico as well as Philippines suggests that the
remittances have increased the accumulation of assets in the farm equipment. Immigration is
also known to promote self-employment and increases investment in small business in the
migrant sending area. The future flow of the remittances can be used as collateral by the
government. Migration is known to affect the welfare of the household along with the home
community. Skilled immigration is also known to increase the number of research workers.

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Immigrants are also known to increase the diversity of the knowledge in an area through local
interactions which is also known to contribute to innovation within local firms (Jahn &
Steinhardt, 2016). The foreigners are also known to embody skills and knowledge which are
sometimes not readily available. The cultural diversity in the workplace help in fostering
innovation where the immigrants are known to bring in the workplace various ideas and
perspectives
Links between the presence of foreigners and innovation
Innovation is termed as the introduction of something new which is built by means of
analytical knowledge that lead to dramatic and radical change. Recent studies have suggested
that immigration is known to boost innovation. One of the way to boost the growth of the
economy is by increasing the number of people working. The number of working population
can also be increased by increasing immigration (Andersson et al, 2016). Some of the studies
have also suggested that immigration not only boost economic growth but also lead to a
positive impact on the wages of the native born workers. A research made on the effect of
Jewish migrants during the World War II on American innovations have showed that there
have been significant increase in the innovation. Most of the benefits took place due to the
establishment of the contacts which took place between the immigrates and native inventors
Jaeger, D. A., Ruist, J., & Stuhler, J. (2018).
The workforce of the United States strongly depends on the migrants. The foreigners
in the United States also represent a substantial share of the overall population. According to
the population survey it have been found out that immigrants are known to account for about
more than 10 percent of the working population. However, some of the researchers also
argue that a lot of people become unemployed to the foreigners(Kerr & Turner, 2015). The
technological development also increases when the firms are known to employ large number
of workers undertaking invention. The migrants are known to influence the global operations

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of their employers. The employment growth of the immigrants is known to be connected with
the overall performance of the firm.
Cultural diversity
The cultural diversity states the existence of a variety of cultural or ethnic groups
which is present within a society. It is a scaled average of the cultural distances present
between the board directors. Although in some case, the cultural diversity in the firms will be
negatively affecting the performance of the firms (Castaño, Méndez & Galindo, 2015).
Cultural diversity and economic growth
In the paper “ Cultural diversity and economic growth” , Phillip Ager have stated that
the United States known to have experienced a huge inflow of immigrants where more than
30 million people known to have migrated from Europe to US. The total inflow rate of
immigrants were about 0.75 percent of the total US population. The paper have also stated
that the rise in cultural fractionalization lead to significant increase in the output per capita.
Cultural diversity also known to have a positive effect on the output growth when a more
diverse working age population will be associated with a greater variety of skills. Sometimes
a more diverse along with a more polarized population will be having a detrimental impact on
the growth of output when it is associated with a greater variety of skills. Those skills will
also enable the production of a large variety of services and goods (Fassio & Ejermo, 2018).
However, a polarized population can have a detrimental effect on the output growth when it
is known to be associated with the increased social conflict. The measure of cultural
polarization is known to get maximized when both the groups are of similar size. The
increase in the cultural fractionalization significantly increases output per capita and on the
other hand, the increase in the cultural polarization is known to decrease output per capita.
The growth promoting immigration policies also showed how immigration is known to affect

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the distribution of cultural differences. When immigration leads to increase in
fractionalization, it will have a positive effect on the economic growth. However, when the
immigration is known to increase the polarization, then the economic growth will be negative
in nature.
Both innovation and technological progress is known to be the key determinant of the
economic growth. There are lot evidences which shows that immigrants are known to play a
huge role in the US innovation. In the year 2016, the immigrants were found to be comprising
of 23 percent of the total workforce (Bratti & Conti, 2018). The future productivity of the
immigrants will improve when they will be collaborating with the other inventors.
The immigrant’s future productivity gets improved while collaborating with an
additional native inventor which are relative to an additional immigrant. This states that
immigrants help in innovation. The immigrant inventors are also known to have large number
of collaborators than the native inventors. The United States is known as the land of
immigrants where there are lots of legal immigrants which is known to make 15 percent of
the workforce of the United States (Gorodnichenko & Roland, 2017). The number of recent
studies have proved the fact that there is a presence of positive links between the immigrants
and level of immigration in firms. Such impacts will also generate significant long term on
the welfare gains. Immigration have the potential to change the demographic composition as
well as the skill composition of the workforce in min many ways which will be promoting or
impeding innovative activities.
Past exposure to migrants known to determine the earnings growth
The recent study on migration states the importance of cultural diversity for increased
productivity at the regional as well as on firm level. Firms are known to have various
strategies regarding wage rates and wage growth which are known to motivate and also retain

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employees. The researchers have found out that there is a presence of economic cost as well
as economic benefits of cultural diversity which is related to immigration (Jaeger, Ruist &
Stuhler, 2018). Cultural diversity is known to enhance productivity, growth as well as
innovation. In the paper “Does cultural diversity matter for regional R & D Activity”, the
author stated that the cultural diversity is known to matter for innovative activity at the
regional activity. The effect on innovation output is generally found for diversity among the
highly qualified employees. Therefore, it can be stated that the cultural diversity is generally
based on the immigrant labour force which releases positive economic effects. Skilled
immigration is also known to an increase the number of research workers (Blind, 2016).
Immigrants are also known to increase the diversity of the knowledge in an area through local
interactions which is also known to contribute to innovation within local firms. The
foreigners are also known to embody skills and knowledge which are sometimes not readily
available. The nature and range of local interactions which are known to contribute to
business innovation are known to be potentially varied.
Benefits of immigration
Immigration is defined to be the intentional movement of an individual to the
destination country of which they do not possess citizenship (Ozgen, 013). Immigration have
been the formidable engine for the economic as well as demographic growth for the United
States. Immigration is also known to enhance the culture of the country. They can expand
culture by introducing new ideas and customs. By introducing new ideas, customs, cuisines
as well as expertise, immigrants can change culture for the better (Huggins & Thompson,
2015). The foreigners can therefore improve economies through hard work and
entrepreneurship. A lot of research have showed that the immigrants have a positive effect on
local as well as national economies. Immigration is known to fund the government activity by

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helping the citizens. They help in expanding the economy by paying taxes and also funds
government actions by building roads, modernizing water systems.
Increase in number of immigrants also leads to increase in investments as they are
known to expand the productivity capacity by building more establishments. The openness of
America to immigration have enriched its culture and have expanded the economic
opportunity and also enhanced its influence in the world (Ibert & Müller, 2015). The
foreigners are known to complement native born workers and also increases the general
productivity through innovation and entrepreneurship. Immigration is known to diversify the
local economies (Andersson et al., 2016). It brings new perspectives, ideas and experiences
to their local communities. Immigration can increase in local production which is known to
create a lot of profit which also help the economy. The strong economies which are based in
immigrants tend to find the most success. Immigration raises the gross domestic product at
national levels. The productivity of immigrants can help in boosting the gross domestic
product every year.

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Reference list
Andersson, U., Dasí, Á., Mudambi, R., & Pedersen, T. (2016). Technology, innovation and
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Bosetti, V., Cattaneo, C., & Verdolini, E. (2015). Migration of skilled workers and
innovation: A European perspective. Journal of International Economics, 96(2), 311-
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Bratti, M., & Conti, C. (2018). The effect of immigration on innovation in Italy. Regional
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Castaño, M. S., Méndez, M. T., & Galindo, M. Á. (2015). The effect of social, cultural, and
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Fassio, C., & Ejermo, O. (2018). The effects of immigration on economic growth–a literature
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Huggins, R., & Thompson, P. (2015). Culture and place-based development: A socio-
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Ibert, O., & Müller, F. C. (2015). Network dynamics in constellations of cultural differences:
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