The Effect of Immigration on Business Dynamics and Employment

Abstract

Immigration, like any positive labor supply shock, should increase the return to capital and spur business investment. These changes should have a positive impact on business creation and expansion, particularly in areas that receive large immigrant inflows. Despite this clear prediction, there is sparse empirical evidence on the effect of immigration on business dynamics. One reason may be data unavailability since public-access firm-level data are rare. This study examines the impact of immigration on business dynamics and employment by combining U.S. data on immigrant inflows from the Current Population Survey with data on business formation and survival and job creation and destruction from the National Establishment Time Series (NETS) database for the period 1997 to 2013. The results indicate that immigration increases the business growth rate by boosting business survival and raises employment by reducing job destruction. The effects are largely driven by less-educated immigrants.

Immigration and Business Dynamics: Evidence from U.S. Firms

“…29 These results comport with and extend a sparse extant literature on immigration and establishment dynamics in the U.S. economy. Olney (2013) and Orrenius et al (2020) also find that immigrant inflows increase establishment presence, with Orrenius et al (2020) also finding that a one percent relative immigration shock leads to a 0.9 percent increase in the establishment count.…”

“…While previous and concurrent research has studied the impact of immigrant inflows on establishment counts in the U.S. (Olney, 2013;Orrenius et al, 2020), this paper directly links this relationship to job creation and productivity. Like Olney (2013), I find that immigrant inflows increase establishment counts, and like Orrenius et al (2020), I find that this effect is driven partially by reduced establishment exit. Relative to these works, I introduce a new identification strategy and both a finer-grained level of study and more comprehensive coverage of the U.S. economy-including establishment-level analyses.…”

Untitled

“…Brinatti et al (2023) find that skilled-intensive firms expand the most after winning the H-1B lottery. Orrenius et al (2020) use the NETS database (from 1997 to 2013) and CPS data and find that immigration (particularly of less-educated individuals) boosts business survival and raises employment by reducing job destruction. Olney (2013) uses data from the CPS and the Statistics of US Businesses and finds that an increase in unskilled immigrants raised the number of establishments between 1998 and 2008.…”