We analyze location choices of foreign-born science and engineering students receiving PhDs from US universities. Foreign students who stay in the United States are positively selected on observables. They tend to stay in the United States during periods of strong US economic growth and during periods of weak home country economic growth. Foreign students from higher-income countries and from recently democratized countries tend not to remain in the United States. Education and innovation may therefore be part of a virtuous cycle by which education enhances a country’s prospects for innovation and innovation makes the country more attractive for scientists and engineers

Science, technology, engineering, and mathematics (STEM) workers are fundamental inputs for innovation, the main driver of productivity growth. We identify the long-run effect of STEM employment growth on outcomes for native workers across 219 US cities from 1990 to 2010. We use the 1980 distribution of foreign-born STEM workers and variation in the H-1B visa program to identify supply-driven STEM increases across cities. Increases in STEM workers are associated with significant wage gains for college-educated natives. Gains for non-college-educated natives are smaller but still significant. Our results imply that foreign STEM increased total factor productivity growth in US cities