Impact of Immigration on Economic Growth in Canada and in its Smaller Provinces

This paper evaluates the potential impact of education levels of immigrants and Canadian-born on economic growth in Canada and its smaller provinces by using data for the period 2006-2013. We specify a production function in which levels of educational attainments of immigrants and Canadian-born workers are entered separately. Feasible generalized least square (FGLS) method is applied to estimate the production function separately for all immigrants, and also for established immigrants (those who have been in Canada for 10 years or longer). The results show that all educational levels of immigrants have positive and statistically significant effects on economic growth. A similar conclusion applies to Canadian-born workers, although the impacts of their university degree holders is lower than that of immigrant university degree holders. Both immigrant and Canadian-born workers have smaller effects on economic growth in smaller provinces, which have attracted larger numbers of immigrants in recent years. The results also show that the economic growth effects are similar for all and established immigrants. Although these results are consistent with previous findings on discounting of immigrants' educational credentials, more data are needed to strengthen their validity. We also suggest that the higher economic growth impact of immigrant university degree holders than that of Canadian-born is indicative of greater social returns to higher education resulting from increased diversity of population which in turn, as some previous studies suggest, can result in increased technological innovation, new ideas, and production of a wide variety of goods and services.