The IT Boom and Other Unintended Consequences of Chasing the American Dream

Khanna, Gaurav; Morales, Nicolas

doi:10.2139/ssrn.2968147

Cited by 24 publications

(37 citation statements)

References 55 publications

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“…Over time, in the latter half of the 2000s, India becomes the major exporter of IT, eroding the US's comparative advantage. Khanna and Morales (2015) can be thought of as a long-run extension of our current work, with consistent implications for the period of study here -the 1990s.…”

Section: Trade With the Rest Of The Worldsupporting

confidence: 75%

“…Even though Freeman (2006) stresses how high-skill immigration may help the US maintain its comparative advantage in IT, we may, expect that immigration policy affects IT production elsewhere in the world, especially via the diffusion of knowledge. Khanna and Morales (2015) draw up a general equilibrium model of both the US and India -the other major producer of IT -to study how the H1B program affects production, human capital accumulation and labor market welfare for agents in both countries. The possibility of migrating to the US induces students and workers in other countries to accumulate CS-specific human capital, and return migrants help facilitate the diffusion of technology.…”

Section: Trade With the Rest Of The Worldmentioning

confidence: 99%

“…We built into the model the possibility that labor demand shocks, such as the one created by the Internet boom, could be accommodated by three sources of CS workers: recent college graduates with CS degrees, US residents in different occupations who switch to CS jobs, and high-skill foreigners. Furthermore, our model assumed firms faced a trade-off when deciding to employ immigrants: foreigners were potentially either more productive or less costly than US workers, but incurred extra recruitment/hiring 1 See Khanna and Morales (2015) for a long-run extension of this work that also models the Indian IT sector.…”

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confidence: 99%

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Understanding the Economic Impact of the H-1B Program on the U.S.

2016

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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.

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Section: Trade With the Rest Of The Worldsupporting

confidence: 75%

Section: Trade With the Rest Of The Worldmentioning

confidence: 99%

mentioning

confidence: 99%

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Understanding the Economic Impact of the H-1B Program on the U.S.

2016

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“…After 2007, when the visas for nurses dropped, nursing enrollment and graduation declined. Khanna and Morales (2017) use the mid-1990s' US internet boomwhich led to an increase in demand for computer scientists (due to skill-selective US immigration policy)-to identify the effect large-scale emigration of India's computer scientists have on human capital investment decisions of workers and students (along with the overall performance of the information technology [IT] sector, both in India and the US). They calibrate their theoretical model of firm production, trade, and the forward-looking decision of workers and students to accumulate human capital.…”

Section: Successful Emigration Is Not a Certainty A Fraction Of Thosmentioning

confidence: 99%

Skilled migration in the literature: what we know, what we think we know, and why it matters to know the difference

Gentile¹

2019

Skilled Labor Mobility and Migration

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The global importance of international migration cannot be underestimated. In 2015, 3.3% of the world's population lived outside their country of origin. 1 Yet, many misconceptions about migration persist in both the literature and policy dialogue. Large-scale surveys conducted in 2018-in Germany, France, Italy, Sweden, the United Kingdom (UK), and the United States (US)-found strikingly large biases in the host's perceptions of the number and characteristics of immigrants. For example, in all countries, respondents greatly overestimate the total number of immigrants. They think immigrants are, among other things, culturally more distant, less educated, more unemployed, poorer, and more reliant on government transfers than is the case (Alesina et al. 2018). Migrants are also believed to be less skilled than those who stayed in the source country, a phenomenon that researchers call "negative selection." 2 In reality, international migration has been increasingly restricted since the end of World War II, to the point that individuals who are not skilled-in fact, exceptionally skilled-find it difficult to seek legal employment in other countries. In fact, the increasing restrictions and regulations imposed on global migrant flows, in turn, have fueled growth in undocumented migration (Massey et al. 2005). Several Organisation for Economic Cooperation and Development (OECD) members use points-based systems that require immigrants to meet a specific set of criteria (e.g., language proficiency, educational attainment, professional or trade licenses/certifications, age, and financial situation) before they are even considered for admission. 3 Host countries then choose among eligible applicants based on their labor and economic needs.

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“…A second set of papers go beyond that and use multi-country models to study the consequences of migration in both receiving and sending countries. Such a global view on migration requires us to incorporate, to some extent, the possibility that production will relocate as a response to changes in immigration policy (Caliendo et al, 2018;Desmet et al, 2018;di Giovanni et al, 2015;Iranzo and Peri, 2009;Khanna and Morales, 2018). This paper contributes to this literature by including the channel of multinational production, which is key to understanding the effects that firms decisions to relocate production due to immigration policies have on welfare and productivity.…”

Section: Introductionmentioning

confidence: 99%

High-Skill Migration, Multinational Companies, and the Location of Economic Activity

Morales¹

2019

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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%.

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The IT Boom and Other Unintended Consequences of Chasing the American Dream

Cited by 24 publications

References 55 publications

Understanding the Economic Impact of the H-1B Program on the U.S.

Understanding the Economic Impact of the H-1B Program on the U.S.

Skilled migration in the literature: what we know, what we think we know, and why it matters to know the difference

High-Skill Migration, Multinational Companies, and the Location of Economic Activity

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