Visa Restrictions Limit U.S. Innovation

Visa policies that restrict high-quality foreign students are a barrier to innovation in the U.S. economy, according to a new paper by Professors Mushfiq Mobarak of the Yale School of Management, Eric Stuen of the University of Idaho, and Keith Maskus of the University of Colorado published in the December 2012 issue of the Economic Journal. The paper has been short-listed for the Royal Economic Society's 2012 best paper award.

"Innovation has always been the competitive advantage of the U.S. economy, especially in the high-tech sector," says Mobarak. "But there has been a gap between the country's leadership in innovation and the quality of the students who are coming out of the secondary school system in the U.S. Who fills this gap? Foreign doctoral students in science and engineering, some of whom choose to stay in the U.S. and contribute to innovation in this country."

To understand whether and how foreign-born students fill the innovation gap, the authors studied the publications and citations of 700,000 doctoral students in 2,300 U.S. science and engineering departments from 1972 to 1998.

Innovative departments that produce many publications and patents attract high-quality foreign and domestic students, making it difficult to discern the students' contributions to the innovation coming out of the departments. The authors devised a novel method to untangle this. Fluctuations or shocks in the form of policy or macroeconomic changes in foreign countries lead to changes in the supply of students coming to the U.S., particularly to university departments with relationships with the affected country.

For example, new government regimes may ease restrictions on study abroad or financial crises may devalue the local currency relative to the dollar and make it more expensive to study in the U.S. Those supply fluctuations allowed the authors to identify whether or not they were followed by a fluctuation in the quality and quantity of scientific output—the number of publications and citations—from departments.

The authors found that both domestic and foreign doctoral students significantly increase the production of scientific knowledge of U.S. science and engineering departments. The two groups produce comparable numbers of publications and citations, which suggests that departments optimize the balance of domestic and foreign students.

Some macroeconomic and policy supply shocks are more likely to affect either paying (non-scholarship) students or scholarship students, according to the paper. Supply shocks that affect paying students more are correlated with fluctuation in lower-quality students and muted contributions to their departments. Shocks that affect scholarship students more are correlated with fluctuations in high-quality students and larger effects on publications produced by their departments.

This finding has implications for visa restrictions. One of the key factors in visa decisions is whether a student has a sufficient financial connection to his or her home country to want to return. The results of the paper suggest that visa policies based on ability to pay or financial resources limit U.S. innovation, and that policies should instead focus on attracting the highest-quality students.

"Innovation produced out of academic departments coupled with university-industry linkages is a significant driver of the U.S. economy," says Mobarak. "If you really care about this innovation output, then visa policy should be geared toward getting high-quality students rather than students with financial resources."

The paper "Skilled Immigration and Innovation: Evidence from Enrollment Fluctuations in U.S. Doctoral Programs" is published in the Economic Journal (December 2012) by Mushfiq Mobarak (Yale School of Management), Eric Stuen (University of Idaho), and Keith Maskus (University of Colorado).