Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/295690 
Year of Publication: 
2022
Series/Report no.: 
CReAM Discussion Paper Series No. 21/22
Publisher: 
Centre for Research & Analysis of Migration (CReAM), Department of Economics, University College London, London
Abstract: 
The H-1B program allows firms in the United States to temporarily hire high skilled foreign citizens. The government restricts foreign labor inflows and therefore generates potential rents typical of a quota. However, the US allocates H-1B status by random lottery. We develop a theoretical model demonstrating that this lottery creates a negative externality by incentivizing firms to search for more workers than can actually be hired and, in so doing, completely destroys quota rents. Moreover, some firms specialize in hiring foreign labor and contracting out those workers' services to third-party sites, and this outsourcing behavior both exacerbates lost quota rents and leads to an increased concentration of H-1B workers among a small number of firms. Simple numerical exercises suggest that the H-1B lottery and outsourcing result in an annual economic loss exceeding $10,000 per new H-1B worker hired relative to what would occur under a quota alone.
Subjects: 
Skilled Workers
H-1B
Quota Rents
Outsourcing
JEL: 
J61
J68
F22
Document Type: 
Working Paper

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