High-Skill Migration, Multinational Companies, and the Location of Economic Activity

The purpose of this paper is to understand the relationship between high-skill immigration and multinational activity. I assemble a novel firm-level dataset on high-skill visa applications and show that there is a large home-bias effect, such that foreign multinational enterprises (MNEs) in the US tend to hire more migrant workers from their home countries compared to US firms. I build and estimate a quantitative model that includes trade, MNE production, and the migration decisions of high-skill workers. The model is then used to run two main counterfactual exercises. The first one evaluates the implications of a more restrictive immigration policy in the US. High-skill industries in the US predominantly reallocate to India and Canada, while real wages decrease for US workers. In the second counterfactual exercise, I increase the barriers to MNE production and find that modeling migration significantly affects the quantitative welfare gains generated by MNEs.