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To the extent that immigration reform is discussed in terms of economics, the debate tends to focus exclusively on labor issues-specifically, how immigrants affect jobs and wages for native citizens. But to understand the economic effects of immigration, and thus develop sounder policies, policymakers need to consider how immigration affects all three core components of economic growth: not just labor, but capital and innovation too.
In the Penn Wharton Public Policy Brief, "The Missing Pieces of the Economic Debate Over Immigration Reform/whr.tn/2vmKbK8>," Professor Exequiel Hernandez discusses new research showing that immigration produces gains for the U.S. economy with respect to capital and innovation. Immigrants help to attract investment from foreign firms and significantly increase bilateral trade flows between the U.S. and their home countries. Immigrants also account for roughly a quarter of all U.S. entrepreneurs. They not only generate novel businesses and inventions, but also introduce novel ideas that U.S. citizens develop further to create new products and companies of their own.
Just as importantly, labor, capital, and innovation are all interrelated. Policies that target one growth component (such as labor) can carry unintended negative consequences for the other two, and result in undesirable economic outcomes.
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Hernandez, Exequiel, "The Missing Pieces of the Economic Debate Over Immigration Reform" (2018). Penn Wharton Public Policy Initiative. 57.