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Firm Dynamics and Immigration: The Case of High-Skilled Immigration

Michael E. Waugh

Chapter in NBER book High-Skilled Migration to the United States and its Economic Consequences (2018), Gordon H. Hanson, William R. Kerr, and Sarah Turner, editors (p. 205 - 238)
Conference held July 10-11, 2016
Published in May 2018 by University of Chicago Press
© 2018 by the National Bureau of Economic Research

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.

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This chapter first appeared as NBER working paper w23387, Firm Dynamics and Immigration: The Case of High-Skilled Immigration, Michael E. Waugh
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