- Immigration
Key takeaways
- During the US technology boom of the 1990s and early 2000s, American firms demanded large numbers of computer scientists. In response, many Indian programmers migrated to the United States.
- However, because the number of US visas was capped, many newly trained computer scientists remained in India. Additionally, after working at US technology firms, large numbers of migrant programmers eventually returned to India.
- Indian firms were able to scale quickly by tapping into this growing pool of talent. By the mid-2000s, India surpassed the United States in IT exports.
- Despite the visa cap, native-born computer scientists in the United States faced increased competition for jobs from the migrant programmers, leading some native-born workers to move into other occupations.
- At the same time, US consumers benefited from lower prices, and US firms benefited from greater innovation.
Debates about high-skill immigration in the United States often focus on a certain set of questions. Do foreign workers lower wages? Do they take jobs from natives? These debates usually treat migration as a one-way flow with effects confined to US borders.
Research shows that this framing misses a much bigger story. During the US technology boom of the 1990s and early 2000s, American firms demanded large numbers of computer scientists. Many of these workers came from India. But because US visas were capped, most Indian students who trained for these jobs never migrated at all, or if they did, they eventually returned home. Their skills transformed India’s economy in lasting ways.
The result was not just migration but a global reallocation of talent and production that reshaped both countries.
The US Tech Boom and a Global Response
The rapid expansion of the US internet technology (IT) sector in the 1990s created enormous demand for software engineers and computer scientists. Wages in these jobs rose quickly, and firms turned to the H-1B visa program to hire talent from abroad.
India emerged as the dominant source of these workers. English-language training, strong engineering colleges, and existing professional networks made Indian graduates especially attractive to US employers.
But the H-1B program was tightly capped. In many years, far more qualified applicants existed than available visas. This meant that migration was uncertain. Some workers migrated. Many never did. Others worked in the United States temporarily and then returned to India.
Brain Gain: How Migration Prospects Changed Education Choices in India
The possibility of migrating to the United States, even if unlikely, dramatically changed incentives for students in India.
Computer science and engineering became gateways to higher expected earnings, whether abroad or eventually at home. Enrollment in engineering programs rose sharply in regions and colleges that already had stronger links to the US labor market.
Importantly, this surge in technical education began before India’s own IT sector had fully developed. Students were not simply responding to local job opportunities; they were responding to global ones.
This is a classic example of brain gain. The chance to migrate raised the incentive to acquire skills, increasing the total supply of educated workers rather than draining it.
When Skills Stay Home or Return
Because US visas were limited, many highly trained Indian computer scientists stayed in India. Others returned after working in the United States for several years, creating a “brain circulation.”
These return migrants brought technical expertise, industry standards, and professional connections. Indian firms were able to scale quickly by tapping into this growing pool of talent.
Over time, this helped India become a global leader in software and IT services. By the mid-2000s, India surpassed the United States in IT exports. What began as a US innovation boom evolved into a global reorganization of production.
This shift was not accidental. It was partly shaped by US immigration policy.
Winners, Losers, and Overall Gains
The spread of the IT sector across borders had uneven effects.
In the United States, native-born computer scientists faced more competition from the Indian migrant programmers who were able to obtain visas, leading some native-born workers to move into other occupations. At the same time, consumers benefited from lower prices, and firms benefited from greater innovation.
In India, wages and opportunities rose for workers who entered technical fields, even if they never migrated. The expansion of the IT sector increased productivity and export revenues, raising average incomes.
On average, workers in both countries gained from high-skill migration, even though the gains were not evenly shared.
Reframing the Immigration Policy Debates
The research outlined here challenges a simple view of immigration as a zero-sum contest between countries.
Restricting visas does not stop skills from spreading. Instead, it changes where those skills are used. In this case, limits on US visas helped accelerate the growth of a competing IT sector abroad.
The findings also highlight a broader lesson: Immigration policy shapes incentives long before a worker ever crosses a border. Expectations matter. So does uncertainty.
When policymakers debate high-skill immigration, they are also shaping education systems, career choices, and industrial development around the world.
Looking Forward
Today’s debates over artificial intelligence, remote work, and global talent echo many of the same forces seen during the IT boom. Skills are increasingly portable, and production can shift rapidly across borders.
Understanding the long-run global effects of migration policy is essential. High-skill migration can raise global welfare, encourage investment in education, and reshape entire industries. But it also creates distinct consequences for different countries—and groups of workers within them—that deserve careful attention.
Note: This research brief is based on the working paper “The IT Boom and Other Unintended Consequences of Chasing the American Dream,” by Gaurav Khanna and Nicolas Morales.
Gaurav Khanna is an associate professor of economics at the School of Global Policy and Strategy, University of California, San Diego.
