In October 2003, the United States drastically reduced the number of H-1B visas available for foreign-born workers. Such restrictions could make U.S. colleges less attractive to foreign students considering an American education as a pathway to U.S. employment. Citizens from five countries are de facto exempt from the visa restrictions, however. Our difference-in-difference estimates show that restrictive immigration policy reduced SAT scores of international applicants by about 1.5% and decreased the number of SAT score reports sent by international students at the top quintile of the SAT score distribution. Restrictive immigration policy disproportionately discourages high-ability international students from pursuing education in the United States.

Science, technology, engineering, and mathematics (STEM) workers are fundamental inputs for innovation, the main driver of productivity growth. We identify the long-run effect of STEM employment growth on outcomes for native workers across 219 US cities from 1990 to 2010. We use the 1980 distribution of foreign-born STEM workers and variation in the H-1B visa program to identify supply-driven STEM increases across cities. Increases in STEM workers are associated with significant wage gains for college-educated natives. Gains for non-college-educated natives are smaller but still significant. Our results imply that foreign STEM increased total factor productivity growth in US cities.