=round(#,0)

=round(#,0)

Figure 1. California Manicurists, 1987-2002

𝑁𝑚=𝛿0+𝛿1 ∙𝑉𝑚+𝛿2 ∙𝑇+𝜇𝑚

Empirical Specification

𝑚=1…34metro areas

0 5000 10000 15000 20000 250000100020003000400050006000700080009000Los Angeles

CA Manicurists, 2002

Non-Viet

Manicuri

sts (#)

Viet Manicurists (#)

Non-Viet Manicurists (#)

Viet Manicurists (#) Time Trend…T=0,…,15

𝛿1=   0.74 5(25.39 )

Do Vietnamese manicurists displace native manicurists?

𝑁𝑚=𝛿0+𝛿1 ∙𝑉𝑚+𝛿2 ∙𝑇+𝜇𝑚

Empirical Specification

𝑚=1…34metro areasNon-Viet Manicurists (# per 1000 residents)

Viet Manicurists (# per thousand residents)Time Trend…T=0,…,15

Do Vietnamese manicurists displace native manicurists?

Non-Vietnamese Manicurists per 1,000 ResidentsOLS (2)

Viet. Manicurists per 1,000 Residents -0.388***(11.40)

Time Trend -0.008**(2.25)

Constant 1.346***(53.92)

Observations 544

R-squared 0.346

Absolute value of t-statistics in parentheses

* significant at 10%; ** significant at 5%; *** significant at 1%

Table 1. Explaining the Number of Non-Vietnamese Manicurists using WLS

where

Assume

Empirical Specification

True Model

𝑁𝑚=𝛿0+𝛿1 ∙𝑉𝑚+𝛿2 ∙𝑇+𝜇𝑚

Unobserved demand shocks that vary across cities, e.g., increased demand by “tweens” and their parents in Contra Costa, according to a couple of newspaper articles.

𝐸 (�̂�1|𝑉𝑚)=𝛿1+𝛿2 ∙𝑐𝑜𝑣 (𝐷𝑚 ,𝑉𝑚)𝑣𝑎𝑟 (𝑉𝑚)

Increases in demand increase the number of native manicurists.

¿ ¿

Vietnamese manicurists are drawn to cities with positive demand shocks and away from those with negative shocks.

(− )Displacement effect Upward bias: the expected value of the estimated displacement effect is less negative than the true displacement effect.

¿

Instrumental Variable (IV) Estimation

Instrument relevance: Instrument exogeneity: z = historical size of Vietnamese enclave (VietEnclave)

instrumental variable

𝑉𝑚 (𝐷 ,𝑉𝐸 )=𝑉𝑚 (𝐷 )+𝑉𝑚 (𝑉𝐸 )

endogenous component, being part of the market for manicurists. exogenous component, being determined outside of the market for manicurists

Cov(VE, Cov(VE,

Hence, the instrument, , is likely to be relevant. Instrument purges of the component attributable to the demand shock due to some cities growing faster than others. Instrument exogeneity: 𝑐𝑜𝑣 (𝑉𝐸 ,𝜇)=𝑐𝑜𝑣 (𝑉𝐸 ,𝛿3 ∙𝐷𝑚 )≈0

The historical size of Vietnamese Enclaves (VE) is likely to be a valid instrument.

ivregress 2sls nonvietpc (vietpc= VietEnclave) T [aweight= pop]

Magic for now; explained after Thanksgiving Break

Non-Vietnamese Manicurists per 1,000 ResidentsOLS 2SLS or IV

Viet. Manicurists per 1,000 Residents -0.388*** -0.703***(11.40)

(11.88)Time Trend -0.008** 0.013***

(2.25) (2.66)

Constant 1.346*** 1.374***(53.92) (50.69)

Observations 544 544

R-squared 0.346 0.242

Absolute value of t-statistics in parentheses

* significant at 10%; ** significant at 5%; *** significant at 1%

Table 1. Explaining the Number of Non-Vietnamese Manicurists using WLS

Displace versus replacement

0.0 0.5 1.0 1.5 2.0 2.50.00.51.01.52.02.53.0

Non-Vietn

amese M

anicurists

(# per th

ou resid

ents)

Vietnamese Manicurists (# per thou residents)

Oxnard, CA198919901991

1987 1989 1991 1993 1995 1997 1999 2001 20030.0

0.5

1.0

1.5

2.0

2.5

Explaining City Fixed Effects

San DiegoRiverside

San Jose (Silicon Valley)

Non

-Vie

t Man

icur

ists

(# p

er 1

,000

res

iden

ts)

3. What is the return to learning English for immigrants?

where Mexican-born workers in 1980

Assume

𝑙𝑛𝑤 𝑖=𝛽0+𝛽1 ∙𝐸𝑛𝑔𝑖+𝜇𝑖

where  𝜇𝑖=𝛽2 ∙ 𝐴𝑖+𝜀𝑖

Empirical Specification

True Model

Instrumental Variables

Questions

1. What is the price elasticity of demand for cremations?

𝐶𝑃𝐼 2011

𝐶𝑃𝐼1991=224.9

136.2∙35.95=$ 59.36

1982−84=100

Instrumental Variables

Questions

1. What is the price elasticity of demand for cremations?

where

Assume

𝐶𝑅𝑚=𝛽0+𝛽1 ∙𝑃𝐶𝑚+𝜇𝑚

Empirical Specification

True Model

𝐸 ( �̂�1|𝑃𝐶𝑚)=𝛽1+𝛽2 ∙𝑐𝑜𝑣 (𝑃𝐶𝑚 ,𝑃𝐵𝑚)

𝑣𝑎𝑟 (𝑃𝐶𝑚)

Instrumental Variable

Instrument relevance:

Instrument exogeneity:

Example 15.3: z=cig tax, x=packs smoked suggests using R2E laws