John Bound (U-M Professor), Gaurav Khanna (U-M PhD ’16, Assistant Professor at the University of California at San Diego), and Nicolas Morales (U-M PhD Student) released a study entitled, “Understanding the Economic Impact of the H-1B Program on the U.S.”
The authors create a general equilibrium model using data from 1994 to 2001 to estimate the effects of foreign high-skilled workers on the welfare of U.S. workers, firms, and consumers. They found that the H1-B visa program had an overall positive effect on IT output and American welfare. However, “as long as the demand curve for high-skill workers is downward sloping, the influx of foreign, high-skilled workers will both crowd out and lower the wages of US high-skill workers,” said Bound.
Over the 1990s, the share of foreigners entering the US high-skill workforce grew rapidly. This migration potentially had a significant effect on US workers, consumers and firms. To study these effects, we construct a general equilibrium model of the US economy and calibrate it using data from 1994 to 2001. Built into the model are positive effects high skilled immigrants have on innovation. Counterfactual simulations based on our model suggest that immigration increased the overall welfare of US natives, and had significant distributional consequences. In the absence of immigration, wages for US computer scientists would have been 2.6% to 5.1% higher and employment in computer science for US workers would have been 6.1% to 10.8% higher in 2001. On the other hand, complements in production benefited substantially from immigration, and immigration also lowered prices and raised the output of IT goods by between 1.9% and 2.5%, thus benefiting consumers. Finally, firms in the IT sector also earned substantially higher profits due to immigration.