Buying Lottery Tickets for Foreign Workers: Search Cost Externalities Induced by H-1B Policy

Rishi Sharma and Chad Sparber

No 13892, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: The H-1B program allows firms in the United States to temporarily hire high-skilled foreign citizens. H-1B workers are highly concentrated among a small number of firms. We develop a theoretical model demonstrating that this phenomenon is an artifact of policy design: When the government restricts foreign labor inflows and allocates H- 1B status by random lottery, it creates a negative externality by incentivizing firms to search for more workers than can actually be hired. Some firms rationally move toward specializing in hiring foreign labor and contracting out those workers' services to third- party sites. This outsourcing behavior further exacerbates total search costs and lottery externalities, resulting in an annual economic loss in the hundreds of millions of dollars.

Keywords: H-1B; skilled workers; outsourcing (search for similar items in EconPapers)
JEL-codes: F22 J61 J68 (search for similar items in EconPapers)
Pages: 44 pages
Date: 2020-11
New Economics Papers: this item is included in nep-lab and nep-mig
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Published - published as 'Buying lottery tickets for foreign workers: Lost quota rents induced by H-1B policy' in: Journal of International Economics, 2024, 150, 103932

Downloads: (external link)
https://docs.iza.org/dp13892.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:iza:izadps:dp13892

Ordering information: This working paper can be ordered from
IZA, Margard Ody, P.O. Box 7240, D-53072 Bonn, Germany

Access Statistics for this paper

More papers in IZA Discussion Papers from Institute of Labor Economics (IZA) IZA, P.O. Box 7240, D-53072 Bonn, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Holger Hinte ().