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14.661 Recitation 4:
Do Immigrants Hurt Americans?
Card-Altonji (1991)
Yusuke Narita
October 2, 2014
Yusuke Narita 14.661 Recitation 4: Do Immigrants Hurt Americans?Card-Altonji (1991)
Question
Do immigrants crowd out natives &/or decrease their wages?
Numerous cross-sectional & DiD papers in labor & deve
Approach 1: Geographic variation in immigration inow:
Cards Miami paper, Card-Altonji (91)

todays focus
etc
endless controversy
Approach 2: Variation across demographic groups over time:
Borjas (03) etc
Yusuke Narita 14.661 Recitation 4: Do Immigrants Hurt Americans?Card-Altonji (1991)
Theoretical Framework of Card-Altonji (91)
Many others focus on immigrants eect on labor market alone

But immigrants not only work but also eat

i.e. have both labor supply & goods demand eects
need for a joint model of labor & goods markets
local market model with a single (local) good & 4 types of labor
Native Immigrant
High Skill Homogeneous/Perfect Substitutes
Low Skill Homogeneous/Perfect Substitutes
Fix # of workers of each type & then add immigrants
Yusuke Narita 14.661 Recitation 4: Do Immigrants Hurt Americans?Card-Altonji (1991)
Good Market
A single (local) good produced by competitive rms with CRS
production function & unit cost function c(wage
s
, w
u
)
Market clearing condition:
good supply Y
=
good demand D
s
(price, w
s
)

demand by skilled
+D
u
(price, w
u
)

by unskilled
+D
x
(price)

export
Yusuke Narita 14.661 Recitation 4: Do Immigrants Hurt Americans?Card-Altonji (1991)
Labor Market
Market clearing condition:
skilled labor supply L
s
(price, w
s
)
=
skilled labor demand Y
c(w
s
, w
u
)
w
s
unskilled labor supply L
u
(price, w
u
)
=
unskilled labor demand Y
c(w
s
, w
u
)
w
u
Yusuke Narita 14.661 Recitation 4: Do Immigrants Hurt Americans?Card-Altonji (1991)
What Happens if I Immigrants Come to the Town?
Assume cross elasticities of good demand & labor supply=0.
Can dierentiate market clearing conditions to get
a original % of unskilled while new %
Recall law of factor demand (Hicks-Marshall rules):

ij
=
j
(
ij
)
Yusuke Narita 14.661 Recitation 4: Do Immigrants Hurt Americans?Card-Altonji (1991)
Suggested Empirical Strategy
Can combine (3.ab) & the law into
log wage
u
= B
u
I /P
log(per capita labor supply)
u
=
u
B
u
I /P
where the coecient is a complex function of parameters:
suggest
Regress log wage
u
& log(per capita labor supply)
u
on I
Data: 1970 & 80 Census on low skill natives of age 19-64 in 120
major cities (Standard Metropolitan Statistical Area; SMSA)
Yusuke Narita 14.661 Recitation 4: Do Immigrants Hurt Americans?Card-Altonji (1991)
4 Low Skill Natives Groups & Outcomes
Dierent groups with dierent age/educ/outcomes
Yusuke Narita 14.661 Recitation 4: Do Immigrants Hurt Americans?Card-Altonji (1991)
4 Low Skill Natives Groups & Outcomes
Groups face dierent levels of competition w/ immigrants
Black women are most competitive
Yusuke Narita 14.661 Recitation 4: Do Immigrants Hurt Americans?Card-Altonji (1991)
Main Results
Lets control for dierences across groups
X
group,city
: groups age & edu, citys population, interactions
Y
group,city
=

of interest
(% of immigrants)
city
+X
group,city
+
group,city
Yusuke Narita 14.661 Recitation 4: Do Immigrants Hurt Americans?Card-Altonji (1991)
Main Results
Y
g,c
=

of interest
(% of immigrants)
c
+ X
g,c
+
g,c
Yusuke Narita 14.661 Recitation 4: Do Immigrants Hurt Americans?Card-Altonji (1991)
Main Results
Y
g,c
=

of interest
(% of immigrants)
c
+ X
g,c
+
g,c
(% of immigrants)
c
IVed for by (% of immigrants)
c
in 1970 &
its square (Bartel (89)s IV, also used in Card (09))
Yusuke Narita 14.661 Recitation 4: Do Immigrants Hurt Americans?Card-Altonji (1991)
Heterogeneous Eects?
Estimates remain unstable even if restricting sample to each group
Yusuke Narita 14.661 Recitation 4: Do Immigrants Hurt Americans?Card-Altonji (1991)
Do Immigrants Hurt Immigrants?
(immigrant wage)
g,c
= (% of immigrants)
c
+ X
g,c
+
g,c
(% of immigrants)
c
IVed for by (% of immigrants)
c
in 70 & its
square
Yusuke Narita 14.661 Recitation 4: Do Immigrants Hurt Americans?Card-Altonji (1991)
Takeaway & Concern
Takeaway
Ambiguous unstable answers to do immigrants hurt natives?
Eects on wage relatively more negative than on employment
Concern
Cross-city variation may be badly contaminated by
endogenous city choices by immigrants
Need for alternative approaches
Yusuke Narita 14.661 Recitation 4: Do Immigrants Hurt Americans?Card-Altonji (1991)
Preview of the Next Lecture
Yusuke Narita 14.661 Recitation 4: Do Immigrants Hurt Americans?Card-Altonji (1991)