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How Workers Born in Other Countries Support Innovation and Growth in Germany

Posted: 22nd May 2017 by Finance Monthly
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Movinga recently completed a study which investigates the possible benefits of foreign human capital in Germany. In order to do this, research was conducted into each of the 16 federal states. The number of firms receiving venture capital, the number of patent applications, the unemployment rate, and the percentage of the state that were born in another country were all examined. The findings show that German states with a higher percentage of foreign-born citizens see higher levels of innovation. They also illustrate that attracting more people from other countries does not mean higher unemployment.

In order to analyse the possible benefits of foreign human capital, the diagrams compare the key indicators on innovation and economic prosperity (firms accepting venture capital, patent applications, unemployment) with the percentage of the population that are born in another country. All data used for this report was provided by The Organisation for Economic Co-operation and Development (OECD) and the German Federal Statistical Office (Destatis).

With 81.4 million citizens, Germany is Europe’s largest country by population. It is also the nation with the largest foreign-born population in Europe, with more than 7.8 million (9.6%) originating from another country. However, this diversity is not evenly spread across Germany’s 16 federal states: five states have more than 10% of citizens who are foreign-born compared, whereas five states have a foreign-born population of less than 3%. This disparity is illustrated in Figure 1.

Figure 2 shows that the city states such as Berlin and Hamburg that have a higher percentage of foreign-born citizens are also home to a higher number of firms receiving venture capital. Similarly, Figure 3 displays that the two federal states with the most patent applications (Bayern and Baden-Württemberg) are also diverse demographically, with around 10% of their populations being foreign-born. In contrast, Figures 1, 2 and 3 also convey that the federal states with fewer firms receiving venture capital and lower numbers of patent applications like Sachsen-Anhalt and Mecklenburg-Vorpommern have smaller foreign-born populations.

Figure 1- Distribution of foreign-born workers in Germany

Figure 2 - Number of firms receiving venture capital


These findings convey that people born in other countries are of great economic value, and that an attitude of openness to foreign-born citizens is important in order for support innovation, research, development and growth. The relative weakness of the federal states with fewer numbers of people born in other countries suggests that they could boost innovation and their general economic performance through attracting more talent born outside Germany.

Figure 3 shows Bayern and Baden-Württemberg also have some of Germany’s lowest unemployment rates, whereas Sachsen-Anhalt and Mecklenburg-Vorpommern have some of the highest unemployment rates. This shows that having a higher number of foreign-born citizens does not mean that fewer people will be able to find jobs. Unemployment is higher in the diverse states of Berlin and Hamburg compared to the national average, but this is more indicative of their unusual positions as city states rather than their economic weakness.

‘The impressive amount of firms accepting venture capital and the number of patent applications in the diverse regions of Berlin, Bayern and Baden-Württemberg suggests that foreign human capital helps support innovation and growth’ said Movinga's MD Finn Age Hänsel.

Figure 3

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