The Effects of Skilled Immigration Restrictions on Corporate Investment: Evidence from H-1B Visa Application Deadlines

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.