US immigration policy and brain waste

The US H-1B visa for highly skilled immigrant labor and the accompanying H-4 visa for their dependents lead to structural constraints that exclude dependents from the labor force. This paper investigates the economic consequences of the US immigration policy that decouples work and admission permission for H-4 visa holders. Using a pool of likely H-1B recipients who were recruited through firms’ job offers, we find that—despite labor force restrictions—the vast majority of married H-1B recipients are accompanied by their spouses. This is particularly the case for male H-1B recipients, making wives rather than husbands carry most of the burden associated labor force exclusions. Using a matched sample of married immigrants with work authorization, we estimate labor force participation probabilities and wages for the pool of likely dependent spouses if they were not facing work restrictions. We find that the policy-imposed labor force exclusion of H-4 spouses leads to substantial losses of spouses’ earnings of about (2014) US$28,000 per capita, which—in the aggregate—implies a sizeable productivity loss for the US due to its restrictive US immigration policy.