The Effects of High-Skilled Immigration on Choice of College Major, Occupation, and Earnings

Among college-educated workers in the United States, the ratio of immigrants grew by 11 percentage points between 1960 and 2010, with a prevalence in science and engineering (SE) occupations. To analyze the impact of college-educated immigrants, I build and estimate an equilibrium model of labor markets, involving individuals’ post-secondary degree and occupation choices. Counterfactual simulations show that if the entry of college-educated immigrants was halted in 1960, the population of native-born students obtaining SE degrees and native SE employment would have increased between 4.6% and 9.0%. However, the earnings of natives would have differed only slightly in each occupation because changes in occupation choice, the aggregate capital, and low-skilled labor would have curtailed potential gains in earnings. When the impact of the declining total SE employment due to the absence of immigrants on productivity is accounted for, the average earnings of native-born college graduates would have declined by 1.3%.