Does Immigration Stimulate Technological Progress?

Immigration has always been a reality of human existence and serves as a mechanism for spreading cultural, technological and institutional innovations between groups of people. In terms of stimulating technological development, immigration can work through both direct and indirect channels. Directly, immigration can transfer technology from one place to another as human capital is transferred by the immigrants themselves. Indirectly, immigrants in the specific settler colonist context can bring institutions with them that, over the long term, encourage the development and adoption of more advanced technologies. The second effect can often be observed occurring simultaneously with the first, and both effects are often persistent and long-lasting.

Throughout history there are instances of immigrant groups introducing new technologies to their receiving economy which then take root and flourish, often being further improved on by natives and immigrants alike. For instance, the Glorious Revolution and the Dutch courtiers it brought with it to England led to the transfer of Dutch financial technologies from the Netherlands to the City of London, where they were expanded upon by English financiers to produce the financial revolution. The bill of exchange, transferable shares and perpetual, government-issued annuities were all Dutch innovations without which the financial revolution would not have been possible. Another example comes from Hornung, who investigates the technological transfer between natives and immigrants in the case of 18th century migration of Huguenots to the technologically backwards Brandenburg-Prussia. Huguenots were famed for their textile-weaving technologies, and once Louis XIV revoked the Edict of Nantes in 1685, which had granted the Huguenots the right to practice their religion without persecution, diaspora communities were formed across Europe, taking with them their skills. Hornung’s analysis suggests that the technological advantage of areas that received the Huguenot immigrants ‘can be observed more than a 100 years later in the industry’. This, however, is an argument rooted in pre-industrial economy in that it demonstrates ‘how much journeymen and traveling apprentices contributed to technological diffusion before the Industrial Revolution’. This suggests that the more complex technologies of the industrial age are not entirely subject to the same transfer mechanisms, and that the role immigration plays in stimulating technological development through the direct channel may have been stronger in the past and gradually weakened as technologies became more intricate and elaborate. In response to this one could argue, as Comin et al. do, that technological persistence is in fact very strong and changes caused by immigration that occurred in the pre-industrial era will have continued to influence economies into the industrial and modern eras. They demonstrate that ‘the magnitude of the association between historical technology adoption and current development is nontrivial’, placing great importance on technological adoption of the sort so often triggered by immigration.

The second, and more complex, means by which immigration could stimulate economic development is by way of institutional change. This channel is often observed in the colonial context, but is distinct from arguments that simply relate colonial rule to institutional change in that it focuses on settler colonialism. Easterly and Levine demonstrate ‘that the proportion of Europeans during colonisation is strongly and positively associated with the level of economic development’, with the result holding when restricting the sample to non-majority-settler colonies and conditioning on the current proportion of the population of European descent. As explanations, they propose a direct human capital argument and an indirect institutional argument. Directly, as above, Europeans brought human capital that slowly disseminated to the population at large and boosted economic development. Indirectly, in areas that had the endowments that led to the formation of settler colonies, immigration of Europeans produced more egalitarian, enduring political institutions that fostered long-run economic development. On the other hand, if the European settler population was too small, settlements would establish extractive political institutions with enduring adverse effects on economic development relative to a situation where there was no settlement at all. The institutional case is convincing in the colonial examples Easterly and Levine present, but the degree to which this argument can be extrapolated onto immigration as a whole is questionable. Most instances of immigration do not occur within a colonial context, and therefore the opportunities for immigrants, who are often marginalised minorities, to create institutional change in the receiving country are usually small.

Immigration’s direct technological effect, especially in pre-industrial society when human capital was simple and was largely carried by journeymen and traveling apprentices, is often strong and long lasting. This direct affect can be observed throughout history and is a primary driver of technological adoption. Immigration leading to indirect institutional change which triggers technological development is rarer. For immigrants to substantially affect the institutions of the receiving nation, this must occur within the colonial context where the immigrants are settler colonists, and is almost always accompanied by the direct effect as well. The indirect case is much rarer and is therefore less informative than the simple yet persistent direct channel.

 

BIBLIOGRAPHY:

  • Hornung (2014). “Immigration and the Diffusion of Technology: The Huguenot Diaspora in Prussia” American Economic Review 104 (1), pp. 84-122.
  • Comin, Easterly and Gong (2010). “Was the Wealth of Nations Determined in 1000 BC” American Economic Journal: Macroeconomics 2 (3), pp. 65-97.
  • Easterly and Levine (2012). “The European Origins of Economic Development”, Journal of Economic Growth 21 (3), pp. 225-257.

One comment

  1. Excellent post!

    You took a topic that in our present era is controversial, + broadened our perception of it by adding important historical insights. The finance history relating to how the Dutch immigrants influenced Britain is very powerful in pure economic terms.

    Like

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