1. Comments by Chinhui Juhn University of Houston
Did Immigration Contribute to Wage Stagnation of Unskilled Workers? By Givoanni Peri
Comments by Chinhui Juhn
University of Houston

2. Summary
Immigration accounts for only a small fraction of the rise in wage inequality and decline in wages of less skilled workers
Immigrants (particularly highly skilled) may have contributed to wage growth via innovation and entrepreneurship (Peri, Shih, and Sparber, 2015; Gauthier-Loiselle and Hunt, 2010; Kerr and Lincoln, 2009; Fairlie, 2012)

3. Two questions
Given an elasticity of substitution between HS Dropouts and HS grads, σHD, do immigrant induced shocks in relative supplies account for declines in relative wages of HS dropouts?
What is a reasonable estimate of 1/σHD ?

4. Borjas, Freeman and Katz (1997)
Table 14. Immigrant Contribution to Labor Supply
HS dropouts vs. HS graduates
Sample and
Year
Dropouts
Graduates
Log gap
1960
0.088
0.051
0.035
1970
0.069
0.046
0.022
1980
0.109
0.058
0.047
1990
0.242
0.079
0.141
1995
0.383
0.083
0.244

5. Borjas, Freeman and Katz (1997)
From , immigrant induced shock in supply of HS dropouts increases .197
Predicted relative wage change = .197*(-.344) = out of actual change in relative wage
Explains more than half of the relative decline in wages of dropouts
Useful to extend to 2010 and beyond using similar methods
They use 1/σ=.344 , which is large, so good to assess using more recent estimates

6. Peri (2016), Table 2

7. Peri (2006), Table 2
From , immigrant induced shock in supply of HS dropouts increases 6 percentage points
Predicted relative wage change = .06*(-.571)= out of actual change in relative wage
Explains less than one-third
Immigrant contribution to relative supply increase of HS dropouts in seems particularly small

8. Suggested robustness checks
Use the same methodology as BFK (1997) and see what has happened in the more recent period
Sample selection criteria for “wage sample” and “quantity sample” a la Katz and Murphy (1992)
Criteria for “wage sample” is to minimize composition changes
Select full-time workers with strong labor market attachment
Hold composition (across sex, age, possibly immigrant nationality) fixed in calculating relative wage changes

9. Suggested robustness checks
Criteria for “quantity sample” is to be inclusive
All workers including part-time and self-employed
Hours instead of bodies
Efficiency units which would entail making some assumptions about substitutability of labor types
How to aggregate young and old workers? Men and women? Treat them equally or weight by their relative wage? Implicitly assuming perfect substitutes

10. Estimate of σHD
Most studies use spatial variation (across states, cities, commuting zones)
Critical issue is unobserved demand shocks (which may be location X skill type specific)
Instrument immigrant-induced supply shocks with initial stock of immigrants by nationality in location interacted with national inflow (Altonji and Card, 1991; Card, 2001; Card, 2009)

11. Estimate of 1/σHD
BFK (1997) .344
Card (2009), Table 2, .02 (IV version)
Borjas, Grogger, Hanson (2012), Table 2, report a range from .024 to .152 depending on MSA/state level data and different controls for MSA/state-specific trends
An estimate of .02 implies that HS dropouts and HS graduates are perfect substitutes so immigrants did not contribute to inequality
Even the highest estimate in BGH suggests that the elasticity is smaller than .344

12. Estimate of 1/σHD Is there a way to improve the networks instrument?
The instrument addresses where the immigrants locate but does not address the timing of immigrant shock
One possibility is to exploit the “push” vs. “pull” types of immigration

13. Estimate of 1/σHD Monras (2015)
Uses immigration shock induced by Mexican Peso Crisis, together with the network instrument, to examine impact on relative wages of high school and less workers
SR ( ) elasticity is .874 (Table C.5)
LR ( ) elasticity is .383 (Table 6)
A number of reasons why the elasticities are not directly comparable to those reported in the paper here but one reason for the difference may be the utilization of a “push” type of immigration episode

14. To summarize
Peri (2016) offers a useful overview which is in agreement with now consensus view that immigration played a minor role in the rise in wage inequality and relative wage declines of less skilled
A direct comparison with BFK (1997) using more recent data and similar methodologies would be useful
In exploring alternatives to estimate the key elasticity parameter, utilizing “push” type of immigration episodes may be fruitful