No abstract

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We would like to acknowledge the Alfred P. Sloan Foundation for generous research support. We thank Breno Braga, ABSTRACTOver 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.

This paper examines the relationship between high-skill immigration and multinational activity. I assemble a novel firm-level dataset on high-skill visa applications and show that there is a large home-bias effect. Foreign multinational enterprises (MNEs) in the US tend to hire more migrant workers from their home countries compared to US firms. To quantify the general equilibrium implications for production and welfare, I build and estimate a quantitative model that includes trade, MNE production, and the migration decisions of high-skill workers. I use an instrumental variables approach to show that the relationship between immigration and MNEs proposed by the model holds in the data. The model is then used to run two counterfactual exercises. The first, evaluates the implications of a more restrictive immigration policy in the US. I find that MNEs play a significant role in how immigration affects the location of production and welfare. In the second counterfactual exercise, I increase the barriers to MNE production to calculate the welfare gains generated by MNEs. I show that a model not incorporating migration would overestimate the MNE welfare gains for high-skill workers by 35% and underestimate welfare gains for low-skill workers by 8%.

This paper examines the relationship between high-skill immigration and multinational activity. I assemble a novel firm-level dataset on high-skill visa applications and show that there is a large home-bias effect. Foreign multinational enterprises (MNEs) in the US tend to hire more migrant workers from their home countries compared to US firms. To quantify the general equilibrium implications for production and welfare, I build and estimate a quantitative model that includes trade, MNE production, and the migration decisions of high-skill workers. I use an instrumental variables approach to show that the relationship between immigration and MNEs proposed by the model holds in the data. The model is then used to run two counterfactual exercises. The first, evaluates the implications of a more restrictive immigration policy in the US. I find that MNEs play a significant role in how immigration affects the location of production and welfare. In the second counterfactual exercise, I increase the barriers to MNE production to calculate the welfare gains generated by MNEs. I show that a model not incorporating migration would overestimate the MNE welfare gains for high-skill workers by 35% and underestimate welfare gains for low-skill workers by 8%.