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On Immigration and Economic Growth

March 27, 2010 Leave a comment

This country will exit its current existential funk only once the economy is creating tens of thousands of jobs per month. While a few large companies can easily cover that for a few months, it is the creation of new companies–the entrepreneurial spirit–which will really create jobs in the coming years. Unfortunately, many entrepreneurs are also immigrants, and immigrants are not exactly encouraged to come to the United States:

Overall, some of the country’s highest rates of entrepreneurship are found among immigrants from the Middle East, Cuba, South Korea and countries of the former Soviet Union. These recent arrivals regularly build new businesses — from street-level bodegas to the most sophisticated technology firms.

Immigrants started one-quarter of all venture-backed public companies between 1990 and 2005. In addition, large U.S. firms are increasingly led by executives with roots in foreign countries, including 14 CEOs of the 2007 Fortune 100.

A good proxy for predicting the future performance of the US economy would be to see how seriously comprehensive immigration reform is taken by Congress.

Venture capitalists have an obvious interest in this effort; here is a particularly interesting take on the issue from the VC Fred Wilson.