Productivity in the US: The Economic Consequences of Regional Agglomeration and Immigration Policy

Ayoung Kim, Purdue University

Abstract

First Essay: The higher productivity of large urban areas can be explained by agglomeration economies. While this relationship has been well documented by many researchers, there are still some challenges related to the identification, estimation, and interpretation of the effects of agglomeration. We contribute to the literature on agglomeration economies by proposing a quasi-experimental research design that allows us to investigate the causal effects of agglomeration on regional productivity. We use a generalized propensity score method, designed to handle multiple continuous treatments for two types of agglomeration--specialization and diversity-- and find that the initial endowments of specialization and diversity and the interplay between these factors have a spatially heterogeneous impact on regional productivity. Our results can help regional stakeholders develop strategies for growth based on industry allocation. We find, however, that regions experiencing stagnant (or decreasing) productivity cannot benefit from industrial agglomeration; these regions must develop a different strategy to boost their regional economies. Second Essay: The underlying theory of agglomeration economies is based on both a microeconomic foundation as well as a macro-level perspective. However, the vast majority of studies remain exclusively tied to a macro-level perspective due to the lack of micro-level data on firms and the demand for economic policies whose implementation could be space and/or industry based. In this chapter, we focus on the regional economic environment measured by economic specialization and diversity as an external driver of firms' productivity, while also acknowledging the pivotal role that individual firm characteristics may play. Random intercept and slopes model with cross-level interaction terms in a multilevel structure allows us to simultaneously capture mechanisms at the micro-level (firm) and at the macro-level (region). Our study finds that the heterogeneity in firm productivity is mainly affected by firm-specific factors rather than regional factors. Specialization and diversity as two types of agglomeration play a positive role for manufacturing and service sectors, however, firms gain a different amount of benefits according to their size and age. The results propose firm-level strategies of location choice. Third Essay: The U.S. H-1B visa for highly-skilled immigrant labor and the accompanying H-4 visa for their dependents leads to structural constraints that exclude dependents from the labor force. Identifying H-1B recipients from the U.S. Census and American Community Surveys, we find that-- despite the labor force exclusion-- the vast majority of married H-1B recipients are accompanied by their spouses. This is particularly the case for male H-1B recipients, making wives rather than husbands carry most of the burden. In order to measure the loss of social productivity due to restricted labor participation, we estimate counterfactual labor force participation probabilities and expected wages for the sample of dependent H-4 spouses using a matched sample of married immigrants with work authorization. It yields an aggregate annual productivity loss of US\$ 2.1 billion. The results support the notion that immigration policies that decouple work and admissions permission impose prejudicial structural constraints on dependent spouses, and cause extensive brain waste and perpetuate immigrant dependents' vulnerable status.

Degree

Ph.D.

Advisors

Delgado, Purdue University.

Subject Area

Economics

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