🗽🧠 Pro-immigration policy and mutual brain gain: A Quick Q&A with … economist Gaurav Khanna

'The average worker in each country is better off because of immigration.'

Dec 11, 2024

I recently asked Gaurav Khanna a few quick questions about the findings of his paper, The IT Boom and Other Unintended Consequences of Chasing the American Dream. Khanna and his co-author ( Nicolas Morales of the Federal Reserve Bank of Richmond) explored the effects of US immigration policy on the economies of both the US and India, specifically in the tech sector.

From the abstract:

Indian students enrolled in engineering schools to gain employment in the rapidly growing US IT industry, via the H-1B visa program. Those who could not join the US workforce, due to the H-1B cap, remained in India, enabling the growth of an Indian IT sector. Those who returned with acquired human capital and technology after the expiration of their visas also contributed to the growing tech-workforce in India. The increase in IT productivity allowed India to eventually surpass the US in software exports . . . we find that on average, workers in each country are better off because of high-skill migration.

In short, the H-1B visa program and 1990s/early 2000s dot-com boom created a win-win: Indians who couldn't get US visas or returned home helped build India's tech sector into a software export leader, while workers in both countries benefited as Indians moved into tech roles and the average US worker benefited overall through increased innovation, productivity gains, and lower IT prices.

Khanna is an associate professor of economics at the UCSD School of Global Policy and Strategy. He is a non-resident fellow at the Center for Global Development, and an editor at the Journal of Labor Economics.

1/ Is the AI technology boom likely to have a similar brain gain effect to that of the internet boom? (Your paper describes major growth in the Indian IT sector following the rise of the internet in the US).

It's hard to say at this stage. It depends on a few factors. First, what are the wage differentials in AI-related fields between the US and other countries like India? If AI jobs are high-paying (which they are likely to be), students are likely to try to acquire skills valued by the market. Second, what is the ability of education institutions to train new students in these fields and absorb any rapid rise in demand? Can traditional Data Science and STEM programs repurpose themselves to do that in various countries? This depends on the pre-existing human capital at training institutions.

2/ Is the amount of brain gain in the country of origin affected by the understanding that successful immigration to the US isn’t guaranteed? How do students demonstrate assessing that risk?

In our story, the prospect of migrating abroad and earning much higher wages in Silicon Valley induced individuals in India to acquire IT skills. Many individuals did not win the H-1B lottery, so stayed behind in India and developed the Indian IT sector. So to answer your question, yes, there must be uncertainty in migrating (e.g., winning the H-1B lottery) for there to be brain gain. If migration was known with certainty beforehand, then only those who were assured of migrating would acquire skills that are valued abroad, and there would be few who acquired skills to stay behind and develop the Indian IT sector.

3/ What is the cost-benefit return on India’s investment into “brain gain” given the inevitable losses in the course of some “brain drain?”

The cost-benefit depends a lot on the sector that sees the "brain gain." If migration prospects of construction workers to the Middle East induced individuals to become construction workers, that would have a very different impact on the Indian economy. Because the IT sector is a high-innovation sector it has wide ranging productivity effects as IT is also an important input into downstream industries). Furthermore, IT has changed the lives of consumers, and so has broad ranging welfare impacts.

The benefits will also depend on the impacts of other complementary occupations. More computer scientists means there's more demand for managers, HR workers, etc. So the whole industry grows.

4/ Do those would-be immigrants who acquire skills but fail to move abroad see meaningful quality of life improvement in their country of origin?

If their main reason to acquire skills was to go abroad, they are only likely to see meaningful life improvements at home if the home sector develops. If the home sector never develops, these individuals would have likely trained in a different occupation if they knew they were going to lose the H-1B lottery. If the home sector does develop, and innovation drives meaningful growth, they may see life improvements.

5/ Can the US use any kind of signaling to trigger particular kinds of skill acquisition abroad and encourage an influx of high-skill immigration?

Wages and job openings are the most credible signal. Firms do release forecasts, but for them to be concrete, they need to be seen in wages and job openings. US firms can publicize this widely and target the global market for talent.

6/ Does the US witness any benefit when foreign students travel to the US to receive education or training and then return to their home countries?

Yes, foreign students can have meaningful benefits for the US economy even if they return home. Foreign students bring much needed revenue to US higher education institutes, and income gains to the college towns surrounding schools. They help cross subsidize local students, and the revenue is spent on research and instruction, bettering the quality of the higher education sector. The US is able to attract top students, and at the graduate level they are engaged in research and instruction while they are students. Of course, if the US can retain the students, the gains would be even larger, as many of these STEM students contribute to innovation when joining the labor market.

7/ As India’s economy grows, are we now seeing them have a similar effect on less-developed countries? Are they attracting brain power from elsewhere?

Partly, yes, in that India attracts talent from other parts of South Asia. But unfortunately, the wages in India are still very low compared to most developed countries, and so most talent would be seeking to migrate to the US, Canada, Australia, Europe, the UK, or East Asia.

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Kristoffer O’Shaugnessy

Dec 12

Mass immigration only benefits certain industries who exploit cheap labor and doesn’t benefit the native population, especially working class and poor in any way, shape, or form. Nations aren’t populated spaces or GDP zones. Demographic replacement is far more damaging than lower GDP.

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🗽🧠 Pro-immigration policy and mutual brain gain: A Quick Q&A with … economist Gaurav Khanna

'The average worker in each country is better off because of immigration.'

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