TDPE presents: The Impact of Skilled Foreign Workers on Firms: An Investigation of Publicly Traded Firms

Anna Maria Mayda on The Impact of Skilled Foreign Workers on Firms: An Investigation of Publicly Traded Firms

Anna Maria Mayda, Georgetown University

Authors: Anirban Ghosh, Anna maria Mayda and Francesc Ortega

Many U.S. businessmen are vocally in favor of an increase in the number of H-1B visas. Is there systematic evidence that this would positively affect firms' productivity, sales, employment or profits? To address these questions we assemble a unique dataset that matches all labor condition applications (LCAs)- the first step towards H-1B visas for skilled foreign-born workers in the U.S. - with firm-level data on publicly-traded U.S. firms (from Compustat). Our identification is based on the sharp reduction in the annual H-1B cap that took place in 2004, combined with information on the degree of dependency on H-1B visas at the firm level as in Kerr and Lincoln (2010). The main result of this paper is that, if the cap on H-1B visas were relaxed, a select group of firms would experience gains in average labor productivity, firm size, and profits. These firms are heavy users of H-1B workers - they belong to the top quintile among filers of LCA applications. We also find that the results are driven by the firms that conduct R&D and by those in the manufacturing sector, which have the highest average R&D expenditures in our data. These empirical findings are consistent with a monopolistic competition model with heterogeneous firms where productivity is a function of the number of skilled workers in the firm.

Anna Maria Mayda is Associate Professor of Economics and Foreign Service at Georgetown University. Her research areas are international trade, international migration and political economy. Her work has been published in top journals such as the Quarterly Journal of Economics, the Review of Economics and Statistics and the Journal of International Economics. She holds a Ph.D. in Economics from Harvard.

Open to the public.