Discussion Paper Details

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Title: High-Skill Immigration, Offshore R&D, and Firm Dynamics

Author(s): Jingting Fan, Eunhee Lee and Valerie Smeets

Publication Date: January 2022

Keyword(s): Firm productivity, High-skill immigration, Immigrant researchers, R&D offshoring and R&D sourcing

Programme Area(s): International Trade and Regional Economics

Abstract: We study firms' decision to use foreign R&D inputs-immigrant researchers and imported R&D services-and the implications of this use for firm performance and aggregate productivity. Using Danish data, we document that firms with immigrant researchers are more likely to source foreign R&D services and that using either foreign input increases R&D efficiency and firm performance. We develop and estimate a model of firm dynamics that rationalizes these patterns. Counterfactual experiments show that the two foreign inputs play crucial yet complementary roles in R&D. Without access to these inputs, R&D participation and the aggregate return to R&D both would decrease substantially.

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Bibliographic Reference

Fan, J, Lee, E and Smeets, V. 2022. 'High-Skill Immigration, Offshore R&D, and Firm Dynamics'. London, Centre for Economic Policy Research.