The Impact of Exchange Rate Fluctuations on Labor Migration: Evidence from U.S. Nonimmigrant Visa Statistics

Since mid-20th century, international migration has become a widespread phenomenon in nearly all industrialized countries and a major shaping force of the international labor market. Most economic theories consider labor migration to be an investment of human capital where workers seek to maximize household income and minimize financial risks. Because exchange rate changes affect prospective income and financial risks associated with migration, studying the responsiveness of skilled migrants to exchange rate fluctuations contribute to the studies of labor economics and international economics. This paper further investigates whether an appreciation in U.S. dollars incentivizes both skilled and unskilled workers to migrate to the United States. In addition to analyzing the effect of the percentage changes in exchange rate, this study examines the effect of exchange rate volatility and investigates whether uncertainty and unpredictability discourage labor migration. This paper singles out skilled migration, as represented by Nonimmigrant H-1B Visa admissions before extending to all temporary worker visas and eventually the all visa classes. This paper discovers a positive effect of the depreciation of the migrants’ home currency on the migration population. Uncertainty in exchange rates also deters the highly skilled from entering the U.S., while the same effect is not seen in overall labor migration. Comparing the estimated effects on labor migration to student visa and total nonimmigrant visa issuance, this paper adds evidence to the human capital theory of labor migration and sheds light on the on-going discussion of immigration reform in the U.S