1. “Along the Watchtower: The Rise and Fall of U. S
“Along the Watchtower: The Rise and Fall of U.S. Low-Skilled Immigration” by Gordon Hanson, Chen Liu, and Craig McIntosh Comments: ADRIANA KUGLER, GEORGETOWN UNIVERSITY & NBER

2. GENERAL COMMENTS Very timely analysis on an important issue.
Brings down pre-conceptions on magnitude, direction, and characteristics of less-skilled immigration.
Importantly, this paper tackles the not-very-much studied question of what factors drive less-skilled immigration.

3. Outline SUMMARY OF PAPER
Decline in less-skilled immigration over the past decade.
Factors that explain the slowdown in less-skilled immigration.
SUGGESTIONS
Measurement of less-skilled immigration.
Disentangling factors that explain the slowdown/decline in less-skilled immigration.

4. Summary of Paper
Decline in less-skilled immigration over the past decade.
Factors that explain the decline in less-skilled immigration.

5. Documenting slowdown in less-skilled immigration
Paper documents stocks of immigrants in different skill groups.
Share of less-skilled immigrants out of US population:
Straight count shows steady increase from 1994 to 2007 and slowdown of the increase after 2007.
When use weights to produce Productivity Equivalent Units (PEUs) and when use hours, then see steady increase from 1994 until 2007 and decline after 2007.

6. Documenting decline in less-skilled immigration
Change in the characteristics of low-skilled immigrants from 1994 to 2007 towards younger and more-educated, but older and more settled immigrants after 2007.
More Latin American immigrants throughout the period − 7 in 10 of least skilled immigrants are from Latin America in 1990 and 9 in 10 by 2010.
Mexican Immigrants are positively selected. Immigrants are overrepresented among those with above mean earnings in Mexico in 1990 and 2000, but selectivity has declined and become close to neutral by 2010.

7. Proposed causes of decline in less-skilled immigration
Temporary differences in economic conditions in the home countries and the USA during the Great Recession.
Increased internal and U.S. border enforcement.
Declines in labor supply in Latin America due to demographic transition in these countries.

8. Proposed causes of decline in less-skilled immigration
The paper first presents descriptive evidence related to the suggested drivers:
Changes in labor income for less-skilled workers in the two countries.
Changes in types of visas and changes in enforcement over the past few decades.

9. Proposed causes of decline in less-skilled immigration
The paper then presents empirical evidence of out-migration from Mexican states in response to bigger birth cohorts in Mexican states relative to the U.S. less skilled population and in response to the ratio of GDP in Mexican states to U.S. GDP:
Results show that the decline in relative supply ratio can account for more than 4/5 of the decline in net migration to the U.S. when instrumenting with ratio out of total pop in the U.S.
GDP at age 16 is significant and negative, but results are not robust.

10. Simulations of impacts of decline in supply of less-skilled
Authors conduct regression analysis of outmigration for 25 LAC countries to do simulations showing what would have been the emigration from sending countries had birth cohort sizes grown as predicted by the UN World Population Prospects: Predicts a that LAC population under 40 will shrink by 6% over the next 30 yrs.
Then, simulate the impact on the skill premium due to the decline since 2007 using a specification a-la Katz and Murphy. Predicts that had less-skilled supply continued to grow as in the period, the skills premium would have increased by 1.1% more per year after 2007.

11. suggestions
Measurement of decline in less-skilled immigration over the past decade.
Disentangling factors that explain the decline in less-skilled immigration.

12. MEASUREMENT OF decline in less-skilled immigration
Suggestions:
Immigrant’s schooling in their home countries not necessarily valued the same in the U.S. Adjust PAU’s by using weights that allow for within group earnings ratios not only by race/gender/education/experience but also by nativity status.
Report the changes in inflows and outflows of immigrants from different skill groups and source countries, which would allow to disentangle contribution of various factors.
Analyze immigration trends in other countries receiving immigrants from Latin America where three causes are not as important.

13. disentangle causes of decline in less-skilled immigration
Temporary differences in economic conditions in the home countries and the USA during the Great Recession.
Increased internal and U.S. border enforcement.
Declines in the labor supply in Latin America due to a demographic transition in these countries.

14. disentangle causes of decline in less skilled immigration
Main shortcomings:
The paper does not attempt to examine causal impacts of the three identified factors.
The drivers are not considered in a single analysis with a single dataset.

15. disentangling causes of decline in less-skilled immigration
Regression of the change in emigration from each Mexican state on the ratio of GDP in each state to GDP in the US, and on the ratio of the birth cohorts:
The analysis uses the relative labor supply shock as an instrument. However, the first stage is never shown and US birth cohort size could itself be affected by previous migration.
It does not include information on enforcement.
Analysis could include a measure of relative inequality in Mexico and the US to understand the relative returns for a HS graduate or dropout.
Study drops 2010, although the Great Recession officially started in Q and ended in Q Also, surprisingly effects become smaller when drop 2010.

16. disentangling causes of decline in less-skilled immigration
Regression of emigration on relative supplies of less skilled migration from LAC countries relative to the US, and GDP in sending countries relative to US GDP:
Analysis shows negative effects of relative labor supply for many countries and positive only for Mexico, El Salvador and Trinidad & Tobago. This is surprising.
Given the positive sign on the GDP ratios, this regression is not capturing the effect of positive demand shocks on keeping migrants from leaving (like previous analysis) but rather the effects on relaxing credit constraints for migrants. Need to explain why this is different from Mexican data.

17. disentangling causes of decline in less skilled immigration
Regression of skilled/unskilled wage differentials a-la Katz & Murphy:
Time trend would imply that labor demand is growing at a constant rate over time period or within each sub-period, and this is not the case. The analysis does include the unemployment rate, but no other measure associated with relative labor demand for skilled to unskilled workers.
Analysis could distinguish immigrants’ and natives’ labor supply for sub-period after 1994 and see if results robust. This would allow to use differential efficiency units for immigrants and natives, and allow for differential elasticities of substitution for immigrant and native workers of different skill levels.

18. conclusion
Tackles a policy issue of great importance for the reality we are leaving in the country today.
Measures factors behind decline in less-skilled migration.
Finds that while cyclical factors play a role in driving down migration from Mexico, the decline in population from Mexico and other Latin American countries was the main source behind the fall in migration.
Paper warns of ageing immigrant undocumented population who will be a burden for states. However, it does not mention that if working age undocumented population were granted legal status, they would help to fund by contributing to Medicare and safety nets.