As regular readers of this blog will know, I’m a strong supporter of open borders, and numerous economists have highlighted the economic value such policies would bring. Perhaps the most famous was a 2011 paper, which argued that opening borders is the equivalent of a $78 trillion “free lunch” ready and waiting for policymakers to capitalize on.
Of course, open borders seem to be even further away, as populist governments enact stricter immigration policies to appeal to the nativist tendencies of the citizens they represent. A new Harvard study doesn’t go as far as to defend or advocate open borders, but does nonetheless highlight how the restrictive immigration arrangements brought in by Donald Trump in his Executive Order from June 2020 has hit the valuation of 471 Fortune 500 firms by around $100 billion.
“On June 22, 2020, President Trump issued an Executive Order (EO) that suspended new work visas, barring nearly 200,000 foreign workers and their dependents from entering the United States and preventing American companies from hiring skilled immigrants using H-1B or L1 visas,” the researchers explain. “Exploiting this shock, and using event study methodology analyzing the cumulative average abnormal returns (CAARs) of Fortune 500 companies following this order, we find that the EO statistically and economically significantly caused negative CAARs of up to 0.45%, the equivalent of over 100 billion of US dollars of losses, based on the firms’ valuation before the event.”
Creating value
The researchers found that many of the firms in the Fortune 500 rely heavily on overseas talent, and so the impact of restrictive immigration policies was enough to knock around 0.45% from their stock market value.
The authors believe their work highlights the tremendous value skilled immigrants bring to the fortunes of their employers. As such, any restrictions on skilled visas represent a significant talent supply shock to firms.
While the researchers accept that their work explores primarily short-term implications of such a supply shock, the medium- to long-term effects are unlikely to be any more favorable, as firms are likely to allocate their resources across geographies to ensure they gain access to the talent they need.
“These results not only contribute to the broader academic debate surrounding whether or not, and to what extent, skilled work visas create value for firms, but they also inform the current ongoing policy discussions surrounding H-1B visas in particular,” the researchers conclude.
Of course, it has often felt like the immigration debate has been driven by emotion rather than logic, but nonetheless, it does no harm to have yet more evidence of the benefits immigration brings, and the damage caused by limiting it.
