The Supply Side of Innovation: H-1B Visa Reforms and US Ethnic Invention

by William R. Kerr & William F. Lincoln

Overview — The H-1B visa program governs most admissions of temporary immigrants into the U.S. for employment in patenting-related fields. This program has become a point of significant controversy in the public debate over immigration, with proponents and detractors at odds over how important H-1B admission levels are for U.S. technology advancement and whether native U.S. workers are being displaced by immigrants. In this study, Kerr and Lincoln quantify the impact of changes in H-1B admission levels on the pace and character of U.S. invention over the 1995-2006 period. Key concepts include:

Immigrants represented 24 percent and 47 percent of the U.S.'s scientists and engineers (S&Es) with bachelors and doctorate educations in the 2000 Census, respectively. Immigrants have accounted for most of the net increase in U.S. S&Es since 1995.
Because it governs the admissions of many S&E immigrants, the H-1B program plays an important role in U.S. innovation. Moreover, the policy shifts in this program have been relatively large compared to other policies concerning immigration or innovation.
Fluctuations in H-1B admissions levels significantly influence the rate of Indian and Chinese patenting in cities and firms dependent upon the program relative to their peers.
Most specifications find little impact on the invention rates of native U.S. workers, although a small crowding-in effect may exist. Most increases in U.S. innovation with higher H-1B admissions come through direct contributions of the immigrants themselves.

Author Abstract

This study evaluates the impact of high-skilled immigrants on US technology formation. Specifically, we use reduced-form specifications that exploit large changes in the H-1B visa program. Fluctuations in H-1B admissions levels significantly influence the rate of Indian and Chinese patenting in cities and firms dependent upon the program relative to their peers. Most specifications find weak crowding-in effects or no effect at all for native patenting. Total invention increases with higher admission levels primarily through the direct contributions of ethnic inventors.