Monopsony in the High-Skilled Migrant Labor Market - Evidence from H-1B Petition Data
66 Pages Posted: 17 Jan 2022 Last revised: 22 Oct 2022
Date Written: January 16, 2022
This paper assesses the extent of monopsony in the H-1B labor market through the lens of employment concentration and its effect on H-1B workers' wages. Using FOIA-requested micro-level H-1B petition data, we calculate the H-1B employment concentration using Herfindahl-Hirschman Index (HHI) from 2010 to 2021. We first discover that the H-1B labor market is nearly twice as concentrated as the broader U.S. labor market, with a steady increasing trend over the last two decades. We then examine the impact of high employment concentration on H-1B workers' wages. The causal link is established by exploiting a lottery system implemented for over-the-cap H-1B applications that generate random labor supplies for each labor market. We find that larger firms disproportionately get more new workers from the exogenous increase in the market-level lottery win rate. These unbalanced distributions of new H-1B workers increase HHI, which in turn, reduces the H-1B workers' wages in the corresponding labor market. A shift from the 25th to the 75th percentile of the employment concentration distribution decreases the workers' wage by 7.1 percent. These local average treatment effects are the largest for first-time Chinese applicants in scientific and technical services.
Keywords: Labor Market Power, H-1B program, Foreign Labor Market
JEL Classification: J6, L1, O3
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