Buying Lottery Tickets for Foreign Workers: Lost Quota Rents Induced by H-1B Policy

Arbeitspapier

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.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CReAM Discussion Paper Series ; No. 21/22

Classification and Topics

• Classification: Wirtschaft ; Geographic Labor Mobility; Immigrant Workers ; Mobility, Unemployment, and Vacancies: Public Policy ; International Migration
• Subject: Skilled Workers ; H-1B ; Quota Rents ; Outsourcing

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Sharma, Rishi ; Sparber, Chad
• Event: Veröffentlichung
• (who): Centre for Research & Analysis of Migration (CReAM), Department of Economics, University College London
• (where): London
• (when): 2022

Further information

• Last update: 10.03.2025, 11:42 AM CET