The impact of the H-1B cap exemption on Ph.D. labor markets

Abstract

The American Competitiveness in the Twenty-First Century Act of 2000 (AC21) eliminated the H-1B cap for foreign employees of academic, nonprofit and government research organizations. This act potentially affects the job preferences of newly graduated foreign Ph.D. students. Choosing a career in an uncapped H-1B-qualified entity means circumventing the risk of facing the fiercely competitive H-1B application process and possibly avoiding potential losses due to a visa rejection. We use data from the census of Ph.D. graduates to examine the causal effect of this policy change on academic and industry labor markets in the USA. We find that as a result of this policy, Ph.D. graduates with temporary visas are 5 percentage points more likely to pursue a job in academia, and 3-4 percentage points less likely to choose a job in industry. A series of robustness checks exclude other external factors around the same time period driving the results.