Working Paper: NBER ID: w23387
Authors: Michael E. Waugh
Abstract: This paper shows how the dynamics of the firm yield new insights into the short- and long-run economic outcomes from changes in immigration policy. I quantitatively illustrate these insights by evaluating two policies: an expansion of and the elimination of the H-1B visa program for skilled labor. A change in policy changes firms’ entry and exit decisions as they dynamically respond to changes in market size. The dynamic response of firms amplifies changes in relative wages as labor demand shifts with the distribution of firms. Firms’ responses also lead to the rapid accrual of aggregate gains/losses in output and consumption. The welfare implications of policy changes depend critically on who bears the burden of creating new firms.
Keywords: Immigration; H-1B Visa Program; Firm Dynamics; Wages; Economic Outcomes
JEL Codes: A1; D92; F22; J61
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Immigration policy changes (K37) | Firm entry (L26) |
| Firm entry (L26) | Stock of skilled labor (J24) |
| Stock of skilled labor (J24) | GDP (E20) |
| Immigration policy changes (K37) | Wage dynamics (J31) |
| Firm entry (L26) | Wage dynamics (J31) |
| Elimination of H-1B program (J68) | Firm entry (L26) |
| Elimination of H-1B program (J68) | Output (Y10) |
| Elimination of H-1B program (J68) | Skill premium (J24) |
| Elimination of H-1B program (J68) | Low-skilled workers' wages (F66) |