Immigration Policy and Equity Returns: Evidence from the H-1B Visa Program

Abstract

I show that firms' access to skilled immigrant labor is an important determinant of the cross-section of equity returns. Using a comprehensive set of data on H-1B visa petitions, I construct an occupation-level measure of labor market competition between skilled immigrant and local workers. I find that stocks of firms in high-competition industries -- those with a high share of labor for which skilled immigrants are close substitutes -- outperform their peers with a low share by 8.8% annually. I show that this premium is explained by firms' differential exposures to priced immigration policy shocks that shift the supply of skilled immigrant labor. Based on evidence from the 2003 H-1B legislative cap reduction as a natural experiment, I show that these shocks differentially impact wages at the occupation-level, leading to an asymmetric effect on firms' cash flows through labor expenditure.