A central question in immigration policy is how mobility restrictions affect the wages of temporary for-
eign workers (TFWs). We study the labor market return to TFWs gaining permanent residency (PR),
which loosens mobility restrictions. Using administrative data linking matched employer-employee
data in Canada to temporary and permanent visa records from 2004–2014 along with an event-study
design, we find that gaining PR leads to a sharp, immediate, and persistent increase in the job switch-
ing rate of 21.7 percentage points and an increase in earnings of 3.2 percent three years after PR.
These gains are driven primarily by reallocation across firms: workers move to higher-paying firms,
and our estimates are consistent with no within-firm effects. To guide and interpret our reduced-
form results, we develop a search-and-matching model featuring heterogeneous workers and firms.
Permanent residents and native-born workers search for jobs in the same labor market and engage in
on-the-job search, while TFWs search separately within a segmented labor market and do not receive
outside wage offers. We calibrate the model to match our reduced-form results, and we use it to
simulate the long-run effects of PR and consider two counterfactual policies: (1) increasing the cost
to firms of posting a TFW vacancy and (2) allowing TFWs to switch employers freely under “open”
visas. We evaluate how these policies affect output, wages, profits, and overall social welfare.