A quirk in the administrative process for granting temporary skilled-worker visas to the United States in 2007 and 2008 caused the U.S. government to randomize which visa applications it processed. This resulted in an exogenous change in the country of location for those workers. The effect of location on earnings is established by following the winners and losers of the visa lottery in the personnel records of a single major multinational software firm…
Location alone accounts for roughly three quarters of international wage gaps in this occupation. Under plausible assumptions about competition in the industry, and given the near-perfect tradability of the output, these findings suggest large differences in worker productivity caused exclusively by local, nontraded inputs accessible in different countries.
Category Archives: Immigration
Mithas & Lucas “U.S. Visa Policies and Compensation of Information Technology Professionals”
Management Science, Vol. 56, No. 5, May 2010, pp. 745–765, pdf
We find that after controlling for their human capital attributes, foreign IT professionals (those without U.S. citizenship and those with H-1B or other work visas) earn a salary premium when compared with IT professionals with U.S. citizenship. The salary premiums for non-U.S. citizens and for those on work visas fluctuate in response to supply shocks created by the annual caps on new H-1B visas. Setting lower and fully utilized annual caps results in higher salary premiums for non-U.S. citizens and those with work visas…
Collectively, the presence of salary premiums for foreign professionals even when a visa cap is under-utilized and the fact that H-1B professionals’ salary premiums are more directly affected by H-1B visa restrictions than that of green card holders imply that (1) foreign IT professionals are complements of American IT professionals, and (2) H-1B professionals may be substitutes for each other because a reduction in their supply affects their wages much more than that of green card holders.
Against the “startup visa”
About a year ago, Paul Graham of Y Combinator put out an idea for a Startup Visa that would allow foreign entrepreneurs to set up in the United States if they could raise enough money from institutional investors such as renowned business angels and VC firms…
Pretty much all the digerati are in love with the idea and believe it will finally allow immigrants to start companies in the US…
For one, getting the visa depends too much on investors. Investors already have too much power in the investor-entrepreneur relationship. If this act is passed, fundraising won’t just affect an entrepreneur’s company, but his or her life. You have to raise that round, or you’ll get deported!…
Another big problem with the Startup Visa Act is that it increases, rather than decreases, risk for the entrepreneurs. Launching a startup by definition means taking on a lot of risk: financial, reputational, you name it. The Startup Visa would increase risk for the entrepreneur by making the stakes so much bigger, by making literally everything depend on success — and not business success, but success how Congress defines it.
Via Tim Lee.
The bottom line on brain drain
“Would Americans put up with a program that inhibits them from working in London or Paris? Skilled African migrants don’t need international organizations suggesting restrictions on where they should live and work either.” – Laura Freschi
The Place Premium: Haiti
Michael Clemens in the Washington Post on Haiti and immigration:
In research I conducted with economists Claudio Montenegro and Lant Pritchett,we compared how much Haitians earn in the United States vs. Haiti. A moderately educated adult male, born and schooled in Haiti, typically enjoys a standard of living more than six times greater in the United States than in his homeland. In other words, U.S. policy wipes out more than 80 percent of a Haitian’s earning power when it keeps him from coming to the United States. This affects everything from the food he can buy to the construction materials he can afford. The difference has nothing to do with his ability or effort; it results purely from where he is.
Peri & Requena: “The Trade Creation Effect of Immigrants”
Giovanni Peri & Francisco Requena have a new NBER working paper:
There is abundant evidence that immigrant networks are associated with larger exports from the country where they settle to their countries of origin. The direction of causality of this association is less clearly established… Using micro data on individual trade transactions from Spanish provinces between 1995 and 2008 and data on the stock of immigrants in those provinces by country of origin… we find that immigrants significantly increase exports (elasticity of 0.10), that the effect is almost entirely due to an increase in the extensive margin and that the effect is somewhat stronger for differentiated goods.
The demand for emigration
Gallup finds about 16% of the world’s adults would like to move to another country permanently if they had the chance. [Note that the map is misleading, as the regional average response is imputed onto all countries in the region.]
HT: Richard Florida.
In defense of brain drain
Michael Clemens and David McKenzie destroy a bunch of bad arguments supporting fears of “brain drain”, the claim that skilled emigration is bad for developing economies.
HT: Roving Bandit.
UPDATE: Lant Pritchett suggests a more neutral term – “cortex vortex” – in this amusing speech from May.
Migrant workers in the crisis
The Financial Times has multimedia coverage of the impact of the crisis on migrant workers:
The economic downturn has inevitably hit migrant workers hard. Here, reporters from the FT’s foreign bureaux investigate the plight of migrants from Poland and the US to Brazil and China, to see which groups are returning home and which are finding innovative ways to survive the downturn abroad.
- Downturn slows tide of US-bound workers, by Matthew Garrahan
- Families struggle to survive as flow of dollars dries up by Adam Thomson
- Downturn hastens Nigeria’s ‘brain gain’, by Matthew Green
- Thoughts turn to home for white South Africans by Richard Lapper
- Sun sets on migrants’ Japanese dreams by Lindsay Whipp and Jonathan Wheatley
- China schools offer parents incentive to stay put by Tom Mitchell
- Downturn puts paid to Polish mobility by Jan Cienski
- Ukrainians forced to cross border for work by Jan Cienski
Hat tip: Laurence.
Missing markets and charging immigrants
Gary Becker wants to charge immigrants $50,000 to enter the United States. He thinks that letting a large number of immigrants come at that price would be preferable to the current quota, which effectively sets the price to infinity for some immigrants.
The crazy thing is that the international labor market is so distorted that migrant laborers are estimated to gain something like $10,000 – $17,000 annually (Lant Pritchett, Let Their People Come), so many might be willing to pay $50,000. But for this proposal to have any credibility, we’d need loans so that immigrants could purchase this massive increase in lifetime earnings. And what would impoverished immigrants pledge as collateral on the loan? This missing market seems crucial, and Becker’s offhand comments (“along the lines of student loans. There would be some role of government because there would have to be some enforcement provision”) aren’t very convincing.
Oddly, the only reason to offer such a proposal is to try to buy off public opposition to increased immigration, but Becker admits that it is a political non-starter.