HW7 - University of Illinois at Urbana-Champaign Professor...

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Professor Ron Laschever, ECON 440, Spring 2010 1 Problem set #7 (and last) Answer Key 1. On April 20, 1980, Fidel Castro declared that any Cubans wishing to emigrate to the U.S. were free to leave from the Port of Mariel. From May to September 1980, 125,000 immigrants arrived in Miami on privately chartered boats. This large influx of immigrants became known as the Mariel Boatlift. Fifty percent of these immigrants settled permanently in Miami. The result was a 7% increase in the labor force of Miami and a 20% increases in the number of Cuban workers in Miami. This wave of immigrants included a relatively high fraction of less-skilled workers and a high fraction with low English ability. [30 Points] a. Show how the influx of immigrants to Miami would be expected to affect the employment and wages of Native low wage workers in Miami. (Assume all low skill workers are perfect substitutes and include a graph in your answer.) A study by Card (1989) finds that there was little change in employment and wages of Native workers, and low skill workers specifically. Explain how the following two scenarios could explain this observation. (Include a graph for each.) The wage for low wage workers (including Natives) will fall. As we have drawn it here, total employment increases by exactly the number of immigrants. So the number of Natives employed will stay the same. However if the supply curve was not perfectly inelastic, total employment would increase by less than the number of immigrants and natives would have lower employment – some natives would drop out of the labor force, unwilling to work for lower wages. This is also identical to one of the slides we had in class (and in the book). S
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HW7 - University of Illinois at Urbana-Champaign Professor...

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