Skilled Labor Rationing, Hiring Uncertainty, and Corporate Investment: Evidence from H-1B Visa Application Deadlines

54 Pages Posted: 7 Jul 2020 Last revised: 30 Aug 2021

See all articles by Sheng-Jun Xu

Sheng-Jun Xu

University of Alberta - School of Business

Date Written: June 10, 2020

Abstract

I study how high-skilled immigration restrictions affect corporate investment by a) setting ex-post constraints on firms' access to skilled labor, and b) creating ex-ante uncertainty over skilled hiring. First, I exploit a temporal discontinuity in firms' ability to apply for H-1B worker visas, and find that ex-post rationing of visas leads to lower capital expenditures. These effects are concentrated in tight labor markets, which suggests that skilled immigrants help mitigate labor market frictions, and in firms seeking to fill lower-wage positions, which suggests that foreign labor facilitates investment by being relatively cheap. Second, using the historical distribution of immigrants to identify ex-ante exposure to visa supply shocks, I find that exposed firms periodically delay investment until hiring uncertainty is resolved. Consistent with models of irreversible investment, these cyclical patterns are concentrated in firms using less-redeployable capital.

Keywords: corporate investment, skilled labor, immigration, capital-skill complementarity, hiring uncertainty, H-1B visas

JEL Classification: G31, E22, J24, J61

Suggested Citation

Xu, Sheng-Jun, Skilled Labor Rationing, Hiring Uncertainty, and Corporate Investment: Evidence from H-1B Visa Application Deadlines (June 10, 2020). Proceedings of Paris December 2020 Finance Meeting EUROFIDAI - ESSEC, Available at SSRN: https://ssrn.com/abstract=3618000 or http://dx.doi.org/10.2139/ssrn.3618000

Sheng-Jun Xu (Contact Author)

University of Alberta - School of Business ( email )

2-32D Business Building
Edmonton, Alberta T6G 2R6
Canada

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