International students and innovation spillovers: Evidence from restrictions on US-trained foreign STEM workers

The effects of human capital on innovation are incompletely understood. This complicates evaluation of the productivity effects of policies that constrain the human capital supply, such as restrictions on work by international students graduating from US universities. This paper uses a 2008 policy reform that extended post-graduation work authorization (Optional Practical Training) for foreign STEM graduates of US universities, a national shock to the supply of specialized high-skill labor. It leverages microdata on the universe of OPT authorizations, utility patents, and technology start-ups. Each additional OPT worker raises annual patenting by 0.083 in the average US city. This comprises 0.044 filed by the OPT workers themselves and 0.039 filed by others, a spillover multiplier of 1.8–1.9 independently verified by analysis of the names listed on induced patents. The shock crowds in native STEM employment, and raises the market value of patents and venture-backed start-up formation. This evidence is consistent with a negative effect on US innovation and productivity from policies that restrict the number or US employment of international STEM graduates from US universities.