Research Economic Seminar: International students and the U.S. labor market

International students represent an important source of talents for the U.S. economy. But not all international graduates enter the U.S. labor market. This represents an opportunity cost for the U.S. economy that partly results from migration policies. In this paper, we study the transition from university to local labor markets of international students and estimate the role of the U.S. immigration policy. We first assess how firms’ recruitment respond to variations in the supply of international graduates. We adopt a causal approach by instrumenting the latter with variations in university tuitions and fees. We find that this recruitment elasticity is positive but smaller than one suggesting therefore a substantial opportunity cost for local labor markets. We then highlight the important role of immigration policy by exploiting via a difference-in-differences setting two reforms of the Optional Practical Training, the visa program enabling international students to enter the U.S. labor market.