An inquiry on the impact of highly-skilled STEM immigration on the U.S. economy

•Examines the impact of highly skilled STEM immigration on the wage structure in the United States.•U.S. and foreign-born STEM workers with similar skills have a high but finite elasticity of substitution.•2000–2015 foreign STEM labor supply shock increases the average wage of U.S.-born STEM workers by 4.67%.•U.S.-born STEM workers with higher educational attainment experience lower wage gains.•The economic benefit for U.S.-born workers from 2000–2015 foreign STEM supply shock is approximately 1.03% of U.S. GDP in 1999. This article estimates the potential economic benefits of STEM immigration and examines the impact of highly skilled STEM immigration on the wage structure in the United States. Considering that foreign-born share of STEM workers has been increasing rapidly in recent years, there are new interests in examining the extent to which labor market outcomes of natives – and immigrants alike – are affected by this supply inflow. The analysis yields a few main findings. First, U.S. and foreign-born STEM workers with similar skills have a high but finite elasticity of substitution ( ∼ 18), implying that the adverse impact of STEM immigration would be more concentrated among immigrant STEM workers themselves. Second, 2000–2015 foreign STEM labor supply shock increases the average wage of preexisting U.S.-born STEM workers by 4.67%. This finding, however, masks a distributional consequence of the shock as native STEM workers with higher educational attainment experience lower wage gains. Finally, the economic benefit for native workers from 2000–2015 foreign STEM supply shock is approximately 103 billion USD or 1.03% of U.S. GDP in 1999. Almost all of this benefit comes from the productivity spillovers associated with high-skilled STEM immigration that increase the productivity and wages of U.S.-born workers.