Quotas and Quality: The Effect of H-1B Visa Restrictions on the Pool of Prospective Undergraduate Students from Abroad

In deciding upon whether to pursue an undergraduate education in the United States, a foreign student considers the expected probability of securing US employment after graduation. The H-1B visa provides a primary means of legal employment for college-educated foreign-nationals. In October 2003, the government drastically reduced the number of available H-1B visas, hence lowering a college-educated foreign-born worker’s probability of finding US employment, and possibly discouraging highly qualified international students from attending US colleges and universities. However, citizens from five countries are de facto exempt from the 2003 H-1B visa restrictions. Using students from these five exempt nations as the control group and other international students as the treatment, we study the effects of the 2003 H-1B policy change on the pool of international applicants to US schools. We use two datasets: (i) College Board SAT score data on prospective international applicants; and (ii) SAT and high-school GPA data on international applicants to a single highly-selective university. Our difference-in-difference estimates show that restrictive immigration policy has had an adverse impact on the quality of prospective international applicants, reducing their SAT scores by about 1.5%. This effect is driven mostly by a decline in the number of SAT score reports sent by international students at the top-quintile of the SAT score distribution, suggesting that the restrictive immigration policy disproportionately discourages high-ability international students from pursuing US education. Our results are robust to alternative specifications, including the use of high-school GPA as a measure of applicant ability.