Ethan Lewis

Immigration, Skill Mix, and the Choice of Technique

Using detailed plant- level data from the 1988 and 1993 Surveys of Manufacturing Technology, this paper examines the impact of skill mix in U.S. local labor markets on the use and adoption of automation technologies in manufacturing. The level of automation differs widely across U.S. metropolitan areas. In both 1988 and 1993, in markets with a higher relative availability of lessskilled labor, comparable plants – even plants in the same narrow (4-digit SIC) industries – used systematically less automation. Moreover, between 1988 and 1993 plants in areas experiencing faster less-skilled relative labor supply growth adopted automation technology more slowly, both overall and relative to expectations, and even de-adoption was not uncommon. This relationship is stronger when examining an arguably exogenous component of local less-skilled labor supply derived from historical regional settlement patterns of immigrants from different parts of the world. These results have implications for two long-standing puzzles in economics. First, they potentially explain why research has repeatedly found that immigration has little impact on the wages of competing native-born workers at the local level. It might be that the technologies of local firms—rather than the wages that they offer—respond to changes in local skill mix associated with immigration. A modified two-sector model demonstrates this theoretical possibility. Second, the results raise doubts about the extent to which the spread of new technologies have raised demand for skills, one frequently forwarded hypothesis for the cause of rising wage inequality in the United States. Causality appears to at least partly run in the opposite direction, where skill supply drive s the spread of skill-complementary technology.

Schooling and the Armed Forces Qualifying Test Evidence from School-Entry Laws

How much can late schooling investments close racial and ethnic skill gaps? We investigate this question by exploiting the large differences in completed schooling that arise among teenagers with birthdays near school-entry cutoff dates. We estimate that an additional year of high school raises the Armed Forces Qualifying Test (AFQT) scores of minorities in the NLSY 79 by 0.31 to 0.32 standard deviations. These estimates imply that closing existing racial and ethnic gaps in schooling could close skill gaps by between 25 and 50 percent. Our approach also uncovers a significant direct effect of season of birth on test scores, suggesting that previous estimates using season of birth as an instrument for schooling are biased.

Local, Open Economies Within the U.S.: How Do Industries Respond to Immigration?

A series of studies has found that relative wages and employment rates in different local labor markets of the US are surprisingly unaffected by local factor supplies. This paper evaluates two explanations for this puzzling empirical fact: (1) Interregional trade mitigates the local impact of supply shocks. (2) Production technology rapidly adapts to the local mix of workers. The author tests these alternative explanations by estimating the effect of increases in relative supplies of particular skill groups on the relative growth rates of different industries and on the relative utilization of these skill groups within industries. Labor supply shocks are identified with a component of foreign immigration driven by the historical regional settlement patterns of immigrants from different countries. Using establishment-level output and capital stock data from the Longitudinal Research Database, augmented with employment and labor force data from the 1980 and 1990 Censuses of Population, changes in local labor supply during the 1980s are shown to have had little influence on local industry mix. Instead, citywide increases in the relative supply of a particular skill group lead to increases in relative factor intensity, with little or no effect on relative wages. These patterns suggest that industries adapt their use of labor inputs to local supplies, as predicted by theoretical models of endogenous technological change. Consistent with this A series of studies has found that relative wages and employment rates in different local labor markets of the US are surprisingly unaffected by local factor supplies. This paper evaluates two explanations for this puzzling empirical fact: (1) Interregional trade mitigates the local impact of supply shocks. (2) Production technology rapidly adapts to the local mix of workers. The author tests these alternative explanations by estimating the effect of increases in relative supplies of particular skill groups on the relative growth rates of different industries and on the relative utilization of these skill groups within industries. Labor supply shocks are identified with a component of foreign immigration driven by the historical regional settlement patterns of immigrants from different countries. Using establishment-level output and capital stock data from the Longitudinal Research Database, augmented with employment and labor force data from the 1980 and 1990 Censuses of Population, changes in local labor supply during the 1980s are shown to have had little influence on local industry mix. Instead, citywide increases in the relative supply of a particular skill group lead to increases in relative factor intensity, with little or no effect on relative wages. These patterns suggest that industries adapt their use of labor inputs to local supplies, as predicted by theoretical models of endogenous technological change. Consistent with this interpretation, on-the-job computer use expanded most rapidly over the 1980s in cities where the relative supply of educated labor grew fastest.

Should the Personal Computer Be Considered a Technological Revolution? Evidence from U.S. Metropolitan Areas

The introduction and diffusion of personal computers are widely viewed as a technological revolution. Using U.S. metropolitan area–level panel data, this paper asks whether links between PC adoption, educational attainment, and the return to skill conform to a model of technological revolutions in which the speed and extent of adoption are endogenous. The model implies that cities will adjust differently to the arrival of a more skill-intensive means of production, with the returns to skill increasing most where skill is abundant and its return is low. We show that the cross-city data fit many of the predictions of the model during the period 1980–2000, the PC diffusion era.

Endogenous Skill Bias in Technology Adoption: City-Level Evidence from the IT Revolution

This paper focuses on the bi-directional interaction between technology adoption and labor market conditions. We examine cross-city differences in PC adoption, relative wages, and changes in relative wages over the period 1980-2000 to evaluate whether the patterns conform to the predictions of a neoclassical model of endogenous technology adoption. Our approach melds the literature on the effect of the relative supply of skilled labor on technology adoption to the often distinct literature on how technological change influences the relative demand for skilled labor. Our results support the idea that differences in technology use across cities and its effects on wages reflect an equilibrium response to local factor supply conditions. The model and data suggest that cities initially endowed with relatively abundant and cheap skilled labor adopted PCs more aggressively than cities with relatively expensive skilled labor, causing returns to skill to increase most in cities that adopted PCs most intensively. Our findings indicate that neoclassical models of endogenous technology adoption can be very useful for understanding where technological change arises and how it affects markets.

Immigration and the Economy of Cities and Regions

In this chapter, we analyze immigration and its effect on urban and regional economies focusing on productivity and labor markets. While immigration policies are typically national, the effects of international migrants are often more easily identified on local economies. The reason is that their settlements are significantly concentrated across cities and regions, relative to natives. Immigrants are different from natives in several economically relevant skills. Their impact on the local economy depends on these skills. We emphasize that to evaluate correctly such impact, we also need to understand and measure the local adjustments produced by the immigrant flow. Workers and firms take advantage of the opportunities brought by immigrants and respond to them trying to maximize their welfare. We present a common conceptual frame to organize our analysis of the local effects of immigration, and we describe several applications. We then discuss the empirical literature that has tried to isolate and identify a causal impact of immigrants on the local economies and to estimate the different margins of response and the resulting outcomes for natives of different skill types. We finally survey promising recent avenues for advancing this research.

Labor Supply and Personal Computer Adoption

The positive correlations found between computer use and human capital are often interpreted as evidence that the adoption of computers have raised the relative demand for skilled labor, the widely touted skill-biased technological change hypothesis. However, several models argue the skill-intensity of technology is endogenously determined by the relative supply of skilled labor. We use instruments for the supply of human capital coupled with a rich dataset on computer usage by businesses to show that the supply of human capital is an important determinant of the adoption of personal computers. Our results suggest that great caution must be exercised in placing economic interpretations on the correlations often found between technology and human capital.