Movement of natural persons and the sieve of immigration policy: Evidence from United States

This article examines the trends and determinants of temporary movement of foreign workers (viz., mode 4 or movement of natural persons under trade ambits) into the United States (U.S.), with a special focus on the role of policy. The study makes use of an alternative dataset, i.e., a subset of the immigration statistics of the U.S., the other available proxies of mode 4 being unreliable. As revealed by the leading and growing share of high-skilled and preferential visa categories, the mode 4 admission in U.S. is significantly influenced by the policy factors than the actual market conditions. The augmented gravity equation validates the preferential policy of U.S. towards the neighboring countries and countries with bilateral trade arrangements. In category-wise regressions, with consistent negative effect of distance and positive effects of membership in North American Free Trade Agreement and Visa Waiver Program, we get stronger evidence for the policy prejudice. The positive network effect, which is declining due to the growingly strict temporary nature of mode 4 movements, and negative impact of the economic crisis in 2008 are the other major findings. Bringing out the insignificance of various push and pull forces like source country working-age population and unemployment levels in U.S., the findings clearly suggest that the structure of mode 4 admissions in U.S. is determined more by policy factors (trade barriers), than the economic factors. The study carries important implications for the trade negotiators from third world countries.