February 28, 2024

Immigrant communities and economic development

The effect of established Danish settlements on the US dairy industry.

Source: yadamons

Much of the US immigration debate today hinges on the immediate impact of opening the country’s doors to foreign born populations. Many citizens worry that immigrants will undercut the American way of life instead of adding to innovation and economic development. But history suggests that identifying which immigrants are “desirable” isn't clear at the outset.

In a paper in the American Economic Journal: Macroeconomics, authors Nina Boberg-Fazlić and Paul Sharp show how Danish American migrant communities in the 1800s altered the trajectory of the US dairy industry over the course of decades. Their findings come from combining and analyzing numerous historical studies, US census data, and Danish emigration archives.

Danish immigrants to the United States over the 19th century were relatively few, even compared to those from other Nordic countries. Some settled in big port cities like New York, but many journeyed further west and made the American countryside their home. Most were farmers and were not highly skilled.

While these Danes put down roots from Minnesota to Utah over the ensuing decades, their native country found a niche in agricultural innovation. In particular, as a world leader in the dairy industry.


Danish immigration to the United States
The chart below shows the total stock of Danish immigrants in the United States (left vertical axis) and the number of emigrants from Denmark with an occupation related to dairying (right vertical axis) by year.


According to Boberg-Fazlić and Sharp, the origins of modern Danish dairying go back at least to the 1700s. In the 18th century, rich landed estates worked out new methods for centralized, large-scale farming. But these methods were of little value to most Danish farmers, who worked on modest-sized farms, until the second half of the 19th century when Danish farmers began to organize into cooperatives. 

These new cooperatives allowed small farmers to pool resources and take advantage of economies of scale. In particular, expensive new inventions became more accessible—most notably the automatic cream separator, which used steam-powered centrifugal forces to separate milk and cream at much faster rates than traditional methods.

“The separator was comparable to other classic innovations like the printing press,” Sharp told the AEA in an interview. “The gains were so massive that as soon as it was implemented, it completely transformed production and the industry as a whole very rapidly.”

At the same time there were major advances in animal hygiene, winter farming, and breeding. By 1890, dairy farming had become a profit-driven business on an unprecedented scale.

While the simultaneous increase in Danish immigration to the United States and this economic revolution in Denmark would suggest that immigrants brought these farming breakthroughs to America directly, it wasn’t new immigrants who brought these revolutionary techniques and technologies to the United States. Rather, Boberg-Fazlić and Sharp argue that the already established Danish American communities were the primary drivers behind modernizing the dairy industry in the Midwest.

Numerous historical anecdotes illustrate that Danish Americans were still keeping contact with their home country during Denmark’s dairy boom. For instance, the immigrants established their own foreign language presses publishing information coming out of Denmark, and they made trips back to their native country, bringing the first cream separator to America in 1882, only four years after the first separator was installed in Denmark.

Politicians have said since America started introducing restrictions on migration that they would prefer not to have refugees and poor people. They wanted people with skills. But ex ante, you don't really know what's going to happen with groups of migrants. They might end up transferring really useful knowledge.

Paul Sharp 

The authors helped to quantify the impact that these established Danish Americans had on developing the American dairy industry. They did this by comparing US counties with more Danes in 1880 to counties with fewer, before and after 1890.

In theory, Danes emigrating before or in 1880 could not have known that Denmark would have such a significant advantage in dairying just one decade later. And only after 1890 would their connection to Denmark be felt by America’s dairy industry. 

The researchers ultimately found that counties with more Danes were associated with more people working in industrial dairying and more dairy cows—indicators of greater modernization and specialization in dairying during the period.

The authors’ work highlights the outsize influence that a small group of immigrants to America had on the country’s economic development. But it also shows that immigrants, whether skilled or not, can play a critical role in facilitating the transfer of knowledge between countries.

“Politicians have said since America started introducing restrictions on migration that they would prefer not to have refugees and poor people. They wanted people with skills,” Sharp said. “But ex ante, you don't really know what's going to happen with groups of migrants. They might end up transferring really useful knowledge.”

Immigrant Communities and Knowledge Spillovers: Danish Americans and the Development of the Dairy Industry in the United States appears in the January 2024 issue of the American Economic Journal: Macroeconomics.