Abstract
The American Competitiveness in the Twenty-First Century Act of 2000 (AC21) eliminated the H-1B cap for foreign employees of academic, nonprofit and government research organizations. This act potentially affects the job preferences of newly graduated foreign Ph.D. students. Choosing a career in an uncapped H-1B-qualified entity means circumventing the risk of facing the fiercely competitive H-1B application process and possibly avoiding potential losses due to a visa rejection. We use data from the census of Ph.D. graduates to examine the causal effect of this policy change on academic and industry labor markets in the USA. We find that as a result of this policy, Ph.D. graduates with temporary visas are 5 percentage points more likely to pursue a job in academia, and 3–4 percentage points less likely to choose a job in industry. A series of robustness checks exclude other external factors around the same time period driving the results.
This is a preview of subscription content, log in via an institution to check access.
Similar content being viewed by others
Data and computer code availability
The data that support the findings of this study are available from National Science Foundation/National Center for Science and Engineering Statistics (NSF/NCSES) but restrictions apply to the availability of these data, which were used under license for the current study, and so are not publicly available. Instructions for how other researchers can obtain the data, and all the information needed to proceed from the raw data to the results of the paper (including code) are, however, available from the authors upon reasonable request and with permission of NSF/NCSES.
Notes
We refer here to an employment-based visa. It is also possible for foreign workers to enter the labor market by marrying a US citizen.
Kerr (2013) provides a review of the contributions of immigrants to US innovation and entrepreneurship.
As one of the three surveys in the Scientists and Engineers Statistical Data System (SESTAT), NSCG concentrates its target population on science and engineering workers. https://highered.ipums.org/highered/survey_designs.shtml#NSCG.
Ignoring individuals’ job-switching patterns is nontrivial, especially when the individual switching pattern is differential across fields of expertise and types of job. The final observed job choice could be driven by unknown factors developed over the years after graduation instead of the original immigration policy change.
The Survey of Doctorate Recipients (SDR) collects additional individual-level data on postgraduation plans, but only for a stratified subsample of science and engineering Ph.D.s.
We exclude the cohort of permanent residents from the analysis for two reasons. First, there is an endogeneity concern of visa status among foreign-born Ph.D. recipients. There may be some underlying factors affecting both their job preferences and visa status (e.g., unobserved family background). It is also possible that permanent visa status was obtained after earning their Ph.D. due to unobserved individual skills and research experience or due to a green card lottery procedure. Both of these factors can drive respondents to favor or reject an academic position. The second concern is the parallel trend assumption, and we test this empirically in Fig. 1. As seen, there is a preexisting jump (dip) around 1999 which disqualifies them as a comparison group in our case.
Working in government as a researcher could be inferred from the database; however, it is not equivalent to working in a government research institution. Note that self-employment is not permitted for foreign nationals. Hence, we concentrate on identifying the potential causal effects on academia and industry.
Due to a violation of the common trend assumption, we concentrate our analysis to US citizens and temporary residents.
We perform the equation-by-equation strategy over the course of the estimation procedure. Since there is a potential cross-equation correlation in the error terms, one may consider the alternative way of employing system of equations (SUR model) to obtain estimates with higher asymptotic efficiency. But, in our case this will give the identical results as the same regressors show up in each equation (Wooldridge 2010).
We follow the classification in the SED dataset to define broad doctoral academic fields. The list of fields is presented in Table 1.
Throughout the OPT duration, foreign Ph.D. holders can acquire postdoctoral training under the same student visa status. Notice that the postdoctoral training to which we refer here is not the short period binding with a subsequent determined employment prospect. That said, the sample of graduates we extract for the test are not individuals working on OPT just to wait for the processing of their H-1B petitions. Instead, postdoctoral participants are Ph.D. recipients spending a formal time on postgraduation training and will be on the job market again when the training ends. Though in both cases of foreign-born graduates working under the OPT program, the difference in job prospects is significant; and with the SED survey, we can differentiate one from the other. Specifically, the survey respondents will choose “Employment (other than postdoctoral fellowship, postdoctoral research associateship and traineeship)” to the question of “What best describes your (within the next year) postgraduate plans?” in the case of having a determined employment plan. Otherwise, they will choose having determined postdoctoral training plan.
In Appendix Figure A3, ESM, we show the trend of yearly Ph.D. graduates from Canada and Mexico and the total H-1B and TN working visa issuances for these two countries from 1997 to 2006 (data source: U.S. State Department). The total number of working visas assigned to Canadian citizen is way lower than the labor force. It reflects what Kato and Sparber (2013) suggested: “Canadians do not have to apply for TN or H-1B visas, but must instead simply meet the criteria to qualify as a TN or H-1B type of worker.” This makes Mexico possibly the more effective comparison group. Yet, the amount of Mexican Ph.D. graduates is way lower than the rest of foreign-born graduates (the treatment group). With approximately 12,000 foreign-born Ph.D. graduates per year, only 200 are from Mexico. The amount of Mexican Ph.D. graduates intending to participate in the US labor market is even lower.
Amuedo-Dorantes and Furtado (2017) documented a shift in foreign-born college graduates’ career choices due to the visa cap change in 2004 using this identification approach and found an increase in the percentage of working in academia for the US labor market participants graduating after 2004. From Fig. 1, the reduction in the visa cap in 2004 did not affect the career choices of Ph.D. students in our case because the preference of working in academia started to decrease for certain academic fields starting in 2004 (an issue we will return to in a later section). In this part, we just run robustness checks using this design by limiting the data from 1996 to 2003.
Since the employer type does not need to be answered when individuals respond not having certain employment plans, the observations of employer types for these participants are considered missing in the main estimates.
To make the magnitude of point estimates comparable with our main analysis, we list in the last row of each panel the mean outcome variable for the treatment group prior to the policy change.
Dividing the DID percentage point estimate by the likelihood of the treated group in the pre-policy period.
Though the yearly cap became nonbinding for four consecutive years after 2001.
References
Amuedo-Dorantes C, Furtado D (2017) Settling for academia? H-1B visas and the career choices of international students in the United States. J Hum Resour 0816–8167r1
Anderson S, Platzer MD (2006) American made: the impact of immigrant entrepreneurs and professionals on US competitiveness. National Venture Capital Association
Borjas GJ (2005) The labor-market impact of high-skill immigration. Am Econ Rev 95(2):56–60
Borjas GJ, Doran KB (2012) The collapse of the Soviet Union and the productivity of American mathematicians. Q J Econ 127(3):1143–1203
Bound J, Demirci M, Khanna G, Turner S (2015) Finishing degrees and finding jobs: us higher education and the flow of foreign it workers. Innov Policy Econ 15(1):27–72
Cameron AC, Gelbach JB, Miller DL (2008) Bootstrap-based improvements for inference with clustered errors. Rev Econ Stat 90(3):414–427
Cheng C, Hoekstra M (2013) Does strengthening self-defense law deter crime or escalate violence? Evidence from expansions to castle doctrine. J Hum Resour 48(3):821–854
Cohen WM, Nelson RR, Walsh JP (2002) Links and impacts: the influence of public research on industrial R&D. Management science 48(1):1–23
Islam A, Islam F, Nguyen C (2017) Skilled immigration, innovation and wages of native-born American. Ind Relat J Econ Soc 56(3):459–488
Kato T, Sparber C (2013) Quotas and quality: the effect of H-1B visa restrictions on the pool of prospective undergraduate students from abroad. Rev Econ Stat 95(1):109–126
Kerr WR (2013) U.S. high-skilled immigration, innovation, and entrepreneurship: empirical approaches and evidence. NBER Working Paper No. 19377
Kerr WR, Lincoln WF (2010) The supply side of innovation: H-1B visa reforms and us ethnic invention. J Labor Econ 28(3):473–508
Lan X (2012) Permanent visas and temporary jobs: evidence from postdoctoral participation of foreign Ph.Ds in the united states. J Policy Anal Manag 31(3):623–640
Lan X (2013) The effects of green cards on the wages and innovations of new Ph.Ds. J Policy Anal Manag 32(4):807–834
Peri G (2007) Higher education, innovation and growth. Education and training in Europe. Oxford University Press, Oxford
Peri G, Shih KM, Sparber C (2014) The effects of foreign skilled workers on natives: evidence from the H-1B visa lottery. UC Davis Working Paper
Shih K (2016) Labor market openness, H-1B visa policy, and the scale of international student enrollment in the United States. Econ Inq 54(1):121–138
Stuen ET, Mobarak AM, Maskus KE (2012) Skilled immigration and innovation: evidence from enrollment fluctuations in US doctoral programs. Econ J 122(565):1143–1176
U.S. Congress U (2000) American competitiveness in the twenty-first century act of 2000
Wadhwa V, Saxenian A, Rissing BA, Gereffi G (2007) America’s new immigrant entrepreneurs: part i
Wooldridge JM (2010) Econometric analysis of cross section and panel data. MIT press, Cambridge
Disclaimer
The use of NSF data does not imply NSF endorsement of the research, research methods, or conclusions contained in this article.
Author information
Authors and Affiliations
Corresponding author
Ethics declarations
Conflict of interest
The authors declare that they have no conflict of interest.
Additional information
Publisher's Note
Springer Nature remains neutral with regard to jurisdictional claims in published maps and institutional affiliations.
We gratefully acknowledge comments from the participants at the 2017 Agricultural and Applied Economics Association Annual Meeting, Chicago, Illinois. We also benefited from communication with Catalina Amuedo-Dorantes and Chad Sparber.
Electronic supplementary material
Below is the link to the electronic supplementary material.
Rights and permissions
About this article
Cite this article
Zhang, Y., Palma, M.A. The impact of the H-1B cap exemption on Ph.D. labor markets. Empir Econ 59, 2125–2152 (2020). https://doi.org/10.1007/s00181-019-01721-5
Received:
Accepted:
Published:
Issue Date:
DOI: https://doi.org/10.1007/s00181-019-01721-5