Can skilled immigration policy raise innovation? Evidence from the Canadian 'points system'

Abstract

We examine the effect of changes in skilled-immigrant population shares in 98 Canadian cities between 1981 and 2006 on per capita patents. The Canadian case is of interest because its 'points system' for selecting immigrants is viewed as a model of skilled immigration policy. Our estimates suggest that the impact of increasing the share of university-educated immigrants on patenting rates is smaller than the impact that both native-borns have in Canada and immigrants have in the U.S.. The modest contribution of Canadian immigrants to innovation is largely explained by the fact that only about one-third of Canadian STEM-educated immigrants finds employment in STEM jobs (relative to two-fifths of the Canadian-born and one-half of immigrants in the U.S.). Consistent with this, we find a large and significant effect of STEM-educated immigrants when we also condition on STEM employment. Our results suggest potential benefits from giving employers a role in the selection of skilled immigrants.