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Quantitative Impact of Reducing Barriers to Skilled Labor Immigration: The Case of the US H-1B Visa

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  • Hyun Lee

    (University of Connecticut)

Abstract

In this paper, I develop a novel two-country general equilibrium model of immigration and return migration with incomplete markets and heterogeneous agents. I use the model to quan-tify the short-run and the long-run macroeconomic impacts of permanently doubling the US H-1B visa quota. In the short-run, I find huge endogenous increase in visa application by less talented skilled foreigners, which increases the probability of obtaining the H-1B visa by only 11 percentage points. In the long-run, US experiences a modest gain in output per capita. Most importantly, I find that there exists a sizable mass of US native skilled workers who—despite the decrease in their equilibrium wage—gain in welfare because of their accumulated capital holdings. Furthermore, I highlight the importance of including return migration in a quantita-tive model of international labor mobility by showing that shutting down return migration in my model results in overestimating the magnitude of the welfare changes by more than sixfold for certain cohorts. JEL Classification: E13, E24, F22, O11, J61 Key words: Immigration, heterogeneous agent model, H-1B visa quota, welfare, transition path, human capital, return migration

Suggested Citation

  • Hyun Lee, 2016. "Quantitative Impact of Reducing Barriers to Skilled Labor Immigration: The Case of the US H-1B Visa," Working papers 2016-35, University of Connecticut, Department of Economics.
  • Handle: RePEc:uct:uconnp:2016-35
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    References listed on IDEAS

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    1. Quantitative Impact of Reducing Barriers to Skilled Labor Immigration: The Case of the US H-1B Visa
      by Christian Zimmermann in NEP-DGE blog on 2016-12-07 20:37:54

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    More about this item

    Keywords

    immigration; heterogeneous agent model; h-1b visa quota; welfare; transition path; human capital; return migration;
    All these keywords.

    JEL classification:

    • E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers

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