Skilled Labor Mobility and Firm Value: Evidence from a Natural Experiment

Skilled workers are important sources of human capital who are often in short supply and costly to replace. In this paper, I assess how skilled labor mobility affects corporate valuation in a policy-relevant setting of foreign skilled workers’ mobility constraints during the U.S. green card application process. Based on a detailed employee-level dataset, I exploit exogenous variations in labor mobility due to Department of State’s imprecise estimates of green card availability, including a mistake that inadvertently allocated green cards to a large group of foreign workers. Using multiple test settings, I find that skilled labor mobility has a negative impact on firm value. This effect is stronger for firms with higher labor adjustment costs. Additionally, the wages of skilled workers increase when immigration policy relaxes mobility constraints. Further analysis suggests that reduction in long-term investment is another potential channel through which labor mobility adversely impacts firm value