NBER study finds that access to skilled H-1B immigrant workers greatly improves the economic performance of start-up firms

Proponents of increased high-skilled immigration in the U.S. often argue these workers help meet a shortage of skilled labor and promote innovation and productivity. Those opposed claim that high-skilled immigrant workers merely displace native-born workers. Despite much debate there is only limited evidence, however, of the impact of high-skilled immigration on companies’ bottom lines. In this study, the authors attempt to address this controversy by looking at data on the impact of H-1B workers on the economic outcomes of startup firms. They choose four years (2008, 2009, 2014 and 2015) where the number of H-1B applications during the filing period exceeded the yearly quota. Such an eventuality triggers the allocation of visas to firms through a random government lottery, creating the environment for a natural experiment. Based on these data, the authors demonstrate that a firm’s rate of success in obtaining visas through the lottery is significantly correlated with improved economic performance across a range of measures, independent of other variables including the nature of the firm or its application characteristics. These measures include a stronger likelihood of receiving venture funding and being funded by a more reputable venture capital firm; of either going public or being acquired; and of demonstrating higher levels of innovation as measured by the number of patents and patent citations. The results of this analysis, the authors argue, demonstrate that foreign high-skilled workers provide these firms with otherwise hard-to-obtain human capital, and that increasing the number of visas for high-skilled workers could have significant economic benefits, for startup firms at least. (Jeffrey Gross, Ph.D.)

Give Me Your Tired, Your Poor, Your High-Skilled Labor: H-1B Lottery Outcomes and Entrepreneurial Success,
National Bureau of Economic Research, October 11, 2019, 46 pp.
Authors: Stephen G. Dimmock et al