On June 22, 2020, President Trump issued an executive order (EO) restricting the entry of individuals seeking to enter the country on a nonimmigrant work visa. As part of this EO, the President proclaimed, “I have determined that the entry, through December 31, 2020, of certain aliens as immigrants and nonimmigrants would be detrimental to the interests of the United States.” Our ongoing research provides evidence to the contrary and documents that the EO negatively affected the market valuation of the largest U.S. firms.
According to estimates, this EO barred the entrance of nearly 200,000 foreign workers and their dependents. The nonimmigrant visas (such as the H-1B and L-1 visas) that were targeted are used by companies to hire or transfer high-skilled immigrants. There is overwhelming evidence documenting that skilled immigration improves firm outcomes such as profits, productivity, production expansion, innovation, and investment. Thus, it is plausible that the Trump administration’s measures significantly restraining immigration will have lasting negative impacts on American firms, and with it, slow down the post-COVID-19 economic recovery.
But we do not have to go very far into the future to assess the negative impacts of this policy. In fact, the largest U.S. firms have already taken a big hit, as we document in our most recent study. We estimate the cumulative average abnormal stock returns for Fortune 500 firms after the June 22 EO that restricted the skilled immigration visas on which Fortune 500 firms especially rely. This approach allows us to estimate the immediate economic impact of the aforementioned EO on the largest U.S. firms. We find that in the aftermath of the EO, the market valuation of the Fortune 500 companies in our sample dropped by about 0.45 percent, a loss to the economy as a whole that we estimate at around $100 billion based on the market valuation of the same firms a day before the EO.
By Dany Bahar, Prithwiraj Choudhury,
and Britta Glennon for BROOKINGS
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