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07.18.2013 - Michael Clemens

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The Effect of Foreign Labor on Native Employment: A Job-Specific Approach and Application to North Carolina Farms

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07.18.2013 - Michael Clemens

  1. 1. Measuring native displacement by foreign labor: A job-specific approach and application to North Carolina farms Michael A. Clemens CGD & NYU FAI July 18, 2013 · IFPRI
  2. 2. Outline Why a new approach Empirical strategy Setting and data Results
  3. 3. Outline Why a new approach Empirical strategy Setting and data Results
  4. 4. Existing approaches
  5. 5. Existing approaches ‘Area’ approach (Card 1990, . . . ) ‘Factor proportions’ approach (Borjas 2003 . . . ) Challenges → Causation → Mechanism → Native self-selection → Connection to policy
  6. 6. Existing approaches ‘Area’ approach (Card 1990, . . . ) ‘Factor proportions’ approach (Borjas 2003 . . . ) Challenges → Causation → Mechanism → Native self-selection → Connection to policy
  7. 7. Existing approaches ‘Area’ approach (Card 1990, . . . ) ‘Factor proportions’ approach (Borjas 2003 . . . ) Challenges → Causation → Mechanism → Native self-selection → Connection to policy
  8. 8. Existing approaches ‘Area’ approach (Card 1990, . . . ) ‘Factor proportions’ approach (Borjas 2003 . . . ) Challenges → Causation → Mechanism → Native self-selection → Connection to policy
  9. 9. Existing approaches ‘Area’ approach (Card 1990, . . . ) ‘Factor proportions’ approach (Borjas 2003 . . . ) Challenges → Causation → Mechanism → Native self-selection → Connection to policy
  10. 10. Existing approaches ‘Area’ approach (Card 1990, . . . ) ‘Factor proportions’ approach (Borjas 2003 . . . ) Challenges → Causation → Mechanism → Native self-selection → Connection to policy
  11. 11. Existing approaches ‘Area’ approach (Card 1990, . . . ) ‘Factor proportions’ approach (Borjas 2003 . . . ) Challenges → Causation → Mechanism → Native self-selection → Connection to policy
  12. 12. Employment effects and native labor supply y = f θg(N, M) , where g = Nρ + γMρ 1 ρ (1) Π ≡ f (θg) − wN N − wM M (2) ln f + ln gN = ln wN − ln θ (3) Ms fixed; Ns = ξ wN ε (4) NM = φ ε, · θf f gM + gNM gM (5)
  13. 13. Employment effects and native labor supply y = f θg(N, M) , where g = Nρ + γMρ 1 ρ (1) Π ≡ f (θg) − wN N − wM M (2) ln f + ln gN = ln wN − ln θ (3) Ms fixed; Ns = ξ wN ε (4) NM = φ ε, · θf f gM + gNM gM (5)
  14. 14. Employment effects and native labor supply y = f θg(N, M) , where g = Nρ + γMρ 1 ρ (1) Π ≡ f (θg) − wN N − wM M (2) ln f + ln gN = ln wN − ln θ (3) Ms fixed; Ns = ξ wN ε (4) NM = φ ε, · θf f gM + gNM gM (5)
  15. 15. Employment effects and native labor supply y = f θg(N, M) , where g = Nρ + γMρ 1 ρ (1) Π ≡ f (θg) − wN N − wM M (2) ln f + ln gN = ln wN − ln θ (3) Ms fixed; Ns = ξ wN ε (4) NM = φ ε, · θf f gM + gNM gM (5)
  16. 16. Employment effects and native labor supply y = f θg(N, M) , where g = Nρ + γMρ 1 ρ (1) Π ≡ f (θg) − wN N − wM M (2) ln f + ln gN = ln wN − ln θ (3) Ms fixed; Ns = ξ wN ε (4) NM = φ ε, · θf f gM + gNM gM (5)
  17. 17. Outline Why a new approach Empirical strategy Setting and data Results
  18. 18. Two natural experiments
  19. 19. Two natural experiments Ns level: Obligatory demand for citizen labor → H-2A visa, no limit to foreign labor supply → Perfect substitutes at ‘Adverse Effect’ Wage → Foreign Labor Certification requirements Ns slope: Shock to reserve option in recession → max{C,L} U = C1−β Lβ s.t. C + wL = w¯L + R → ns,i = 0 if w R < β 1−β 1 ¯L ; (1 − β)¯L − β · R w if w R β 1−β 1 ¯L .
  20. 20. Two natural experiments Ns level: Obligatory demand for citizen labor → H-2A visa, no limit to foreign labor supply → Perfect substitutes at ‘Adverse Effect’ Wage → Foreign Labor Certification requirements Ns slope: Shock to reserve option in recession → max{C,L} U = C1−β Lβ s.t. C + wL = w¯L + R → ns,i = 0 if w R < β 1−β 1 ¯L ; (1 − β)¯L − β · R w if w R β 1−β 1 ¯L .
  21. 21. Two natural experiments Ns level: Obligatory demand for citizen labor → H-2A visa, no limit to foreign labor supply → Perfect substitutes at ‘Adverse Effect’ Wage → Foreign Labor Certification requirements Ns slope: Shock to reserve option in recession → max{C,L} U = C1−β Lβ s.t. C + wL = w¯L + R → ns,i = 0 if w R < β 1−β 1 ¯L ; (1 − β)¯L − β · R w if w R β 1−β 1 ¯L .
  22. 22. Two natural experiments Ns level: Obligatory demand for citizen labor → H-2A visa, no limit to foreign labor supply → Perfect substitutes at ‘Adverse Effect’ Wage → Foreign Labor Certification requirements Ns slope: Shock to reserve option in recession → max{C,L} U = C1−β Lβ s.t. C + wL = w¯L + R → ns,i = 0 if w R < β 1−β 1 ¯L ; (1 − β)¯L − β · R w if w R β 1−β 1 ¯L .
  23. 23. Two natural experiments Ns level: Obligatory demand for citizen labor → H-2A visa, no limit to foreign labor supply → Perfect substitutes at ‘Adverse Effect’ Wage → Foreign Labor Certification requirements Ns slope: Shock to reserve option in recession → max{C,L} U = C1−β Lβ s.t. C + wL = w¯L + R → ns,i = 0 if w R < β 1−β 1 ¯L ; (1 − β)¯L − β · R w if w R β 1−β 1 ¯L .
  24. 24. Two natural experiments Ns level: Obligatory demand for citizen labor → H-2A visa, no limit to foreign labor supply → Perfect substitutes at ‘Adverse Effect’ Wage → Foreign Labor Certification requirements Ns slope: Shock to reserve option in recession → max{C,L} U = C1−β Lβ s.t. C + wL = w¯L + R → ns,i = 0 if w R < β 1−β 1 ¯L ; (1 − β)¯L − β · R w if w R β 1−β 1 ¯L .
  25. 25. Two natural experiments Ns level: Obligatory demand for citizen labor → H-2A visa, no limit to foreign labor supply → Perfect substitutes at ‘Adverse Effect’ Wage → Foreign Labor Certification requirements Ns slope: Shock to reserve option in recession → max{C,L} U = C1−β Lβ s.t. C + wL = w¯L + R → ns,i = 0 if w R < β 1−β 1 ¯L ; (1 − β)¯L − β · R w if w R β 1−β 1 ¯L .
  26. 26. NC unemployment, by DES office & statewide
  27. 27. Outline Why a new approach Empirical strategy Setting and data Results
  28. 28. North Carolina Growers Association
  29. 29. North Carolina Growers Association
  30. 30. Overview of Mexican H-2A Workers at NCGA Year Number Months/worker 2004 6799 4.454 2005 5602 4.527 2006 4786 4.571 2007 5410 4.797 2008 5969 5.233 2009 6237 5.084 2010 6201 5.613 2011 6474 5.496 2012 7008 5.506 Mean 6054 5.054 Number of workers shows number of unique individuals starting one or more H-2A employment events in each calendar year. Months/worker shows average months of work by each individual. ‘Mean’ row covers 2004–2012.
  31. 31. Overview of DES office referrals Unemp. DES to all employers Rate N New Referred Year (%) apps Non-ag. Ag. 1998 3.53 140782 – – – 1999 3.27 132707 – – – 2000 3.75 154577 – – – 2001 5.64 234934 – – – 2002 6.63 279281 – – – 2003 6.45 274193 – – – 2004 5.54 236328 – – – 2005 5.26 229030 – – – 2006 4.74 212099 236011 1642996 40880 2007 4.71 213276 238386 1586462 40924 2008 6.19 283048 256865 1498566 32958 2009 10.76 490010 276978 1396083 27168 2010 10.94 504885 267076 1604416 32245 2011 10.51 489095 – – – 2012 9.52 446469 – – –
  32. 32. Overview of DES office referrals Unemp. DES to NCGA Rate N Referred Hired Started Complete Unknown Year (%) 1998 3.53 140782 112 98 14 0 25 1999 3.27 132707 41 39 6 0 3 2000 3.75 154577 35 34 4 0 1 2001 5.64 234934 46 44 13 0 0 2002 6.63 279281 99 91 43 2 2 2003 6.45 274193 244 242 83 3 0 2004 5.54 236328 134 134 37 2 3 2005 5.26 229030 57 57 22 6 2 2006 4.74 212099 88 88 22 10 15 2007 4.71 213276 – – – – – 2008 6.19 283048 170 167 58 11 50 2009 10.76 490010 108 105 48 6 0 2010 10.94 504885 74 73 30 10 10 2011 10.51 489095 268 245 163 7 0 2012 9.52 446469 253 213 143 10 0
  33. 33. Average NCGA H-2A employment events per year
  34. 34. Avg. U.S. referrals/yr (residence) & DES offices
  35. 35. Average unemployment rate in 2011 (%)
  36. 36. Outline Why a new approach Empirical strategy Setting and data Results Native labor supply: Extensive margin Native labor supply: Intensive margin Effects on native employment
  37. 37. Effects of the recession on job referrals All ag. jobs NCGA jobs Referred Placed Referred Hired Started Completed Unemployment (%) −2.398∗ −0.417 0.0122∗∗ 0.0108∗∗ 0.00909∗∗ −0.000281 (1.019) (0.519) (0.00410) (0.00381) (0.00289) (0.000465) New applications (000s), t 345.7∗ 258.0 −0.260 −0.240 −0.208 −0.00985 (168.3) (146.1) (0.168) (0.155) (0.120) (0.0144) ” t − 1 45.26 76.21 −0.343∗ −0.323∗ −0.189∗∗ −0.0258 (29.50) (45.29) (0.145) (0.142) (0.0731) (0.0207) ” t − 2 −33.14 −36.53 −0.376∗ −0.349∗ −0.173 −0.0251 (30.14) (27.29) (0.176) (0.172) (0.0955) (0.0195) ” t − 3 −29.22 −53.81 −0.548∗∗ −0.547∗∗ −0.309∗∗ −0.0298∗ (19.56) (32.93) (0.176) (0.168) (0.113) (0.0146) ” t − 4 −29.11∗ −26.57 −0.333∗ −0.296∗ −0.136∗ −0.00699 (12.89) (15.20) (0.133) (0.127) (0.0545) (0.0167) ” t − 5 −55.91∗∗ −49.36∗ −0.390∗ −0.396∗ −0.156 −0.0394∗ (21.43) (20.50) (0.169) (0.167) (0.0831) (0.0185) ” t − 6 −57.18∗∗ −45.91∗∗ 0.375∗ 0.384∗ 0.161∗∗ 0.00613 (19.32) (16.93) (0.171) (0.171) (0.0542) (0.00929) ” t − 7 −50.86∗ −52.23∗ 0.459 0.455 0.277∗ 0.108 (23.17) (22.66) (0.266) (0.271) (0.137) (0.0664) ” t − 8 −28.65 −48.62 0.769∗ 0.731∗ 0.492 0.0212∗ (15.82) (25.34) (0.326) (0.321) (0.253) (0.0103) ” t − 9 1.086 14.74 0.219 0.189 0.0361 −0.0340 (12.44) (10.51) (0.288) (0.266) (0.234) (0.0404) ” t − 10 −49.35 −22.89 0.385∗ 0.362∗ 0.163∗ 0.0296 (43.45) (35.70) (0.161) (0.150) (0.0808) (0.0327) Constant 41.86∗∗∗ 20.26∗∗ 0.0779 0.0781 0.0117 0.0141∗ (11.36) (7.005) (0.0412) (0.0403) (0.0168) (0.00688) N 3828 3828 3828 3828 3828 3828
  38. 38. Marginal effects of unemployment rate on U.S. labor supply to NCGA (State total/yr)
  39. 39. U.S. workers, from referral to start date
  40. 40. U.S. workers, from referral to start date
  41. 41. U.S. & Mexican, from start to quit/fired
  42. 42. U.S. only, from start to quit/fired
  43. 43. Missing observations on outcome and duration U.S. worker duration Mexican worker duration Not missing Missing Not missing Missing Outcome: Completed 67 1 56505 0 Quit 488 100 2285 0 Fired 31 7 2464 1 Unknown 0 111 0 126
  44. 44. Rough estimates of MRP of manual labor Crop Cucumber Sweet potato Tobacco Year 2002 2013 2002 2012 2009 Revenue/acre ($) 2040.00 2325.00 2637.50 3375.00 4050.00 Non-labor cost/acre ($) 806.17 1168.20 1485.82 1696.56 2627.95 Hours/acre 80 80 50 50 60 Revenue/acre/hr ($) 25.50 29.06 52.75 67.50 67.50 Non-labor cost/acre/hr ($) 10.08 14.60 29.72 33.93 43.80 Labor cost/acre/hr ($) 10.54 13.58 10.54 13.58 13.08 Cost fraction 0.51 0.48 0.26 0.29 0.23 NCGA wage/hour ($) 7.53 9.70 7.53 9.70 9.34 Short run, zero substitution (Leontief) MRP/hr/acre ($) 25.50 29.06 52.75 67.50 67.50 Multiple of wage 3.39 3.00 7.01 6.96 7.23 Long run, unit elasticity of substitution (Cobb-Douglas) MRP/hr/acre ($) 13.04 14.00 13.81 19.29 15.52 Multiple of wage 1.73 1.44 1.83 1.99 1.66
  45. 45. Statewide US job creation by 6,500 H-2A workers Short run Long run low high low high MRP multiplier 4 6 2 3 Total wage bill ($m) 74.7 74.7 74.7 74.7 Revenue product ($m) 298.8 448.1 149.4 224.1 Output multiplier 1.657 1.657 1.657 1.657 Effect on NC GDP ($m) $495 $743 $248 $371 Jobs multiplier 9.527 9.527 9.527 9.527 US jobs created in NC 2846 4269 1423 2135 H-2A workers per US job 2.3 1.5 4.6 3.0
  46. 46. http://mclem.org

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