Economists study unintended impact of H-1B visa cap

Back to All Stories

As an economist, Takao Kato studies unintended consequences of public policy decisions. As a professor at Colgate with many international students in his classes, he considers their prospects for gainful employment in the United States. That connection inspired a research project he conducted with Chad Sparber, assistant professor of economics.

The two found that when the availability of H-1B visas was drastically restricted in 2003, SAT scores for international applicants to American colleges and universities dropped 1.5%. The decline, they saw, was among the top echelon of students.

During the same period, there was no change in the SAT scores of applicants to colleges in five control countries — Australia, Canada, Chile, Mexico, and Singapore — where there is no legal impediment to working after graduation.

The coveted H1-B visa is what allows employed foreign-born nationals with a college degree to stay in the United States for up to six years. Without one, a job offer is worthless.

“You are essentially losing the best and the brightest,” said Kato, W.S. Schupf Professor of economics and Far Eastern Studies. “Some of those people become job creators, future entrepreneurs, future research and developers,” he said, “so their disappearance is bad for our economy.”

Sparber said the problem also has implications for financial aid. “If you’ve closed these U.S. labor markets, the value of a U.S. degree has gone down. So if you’re still going to come to the U.S. for education you need to have other incentive, and that would be financial aid.”

Their paper, titled “Quotas and Quality: The Effect of H-1B Visa Restrictions on the Pool of Prospective Undergraduate Students from Abroad,” is forthcoming in The Review of Economics and Statistics, which is edited at Harvard University’s Kennedy School of Government and published by MIT Press.

Next, Kato and Sparber plan to inform policy makers of their findings. “Current immigration debate focuses mainly on the illegal, unskilled segment. Our research sheds some new light on an issue affecting skilled immigrants,” Kato said.