Attenuation Bias in Measuring the Wage Impact of Immigration
Although economic theory predicts an inverse relation between relative wages and immigration-induced supply shifts, it has been difficult to document such effects. The weak evidence may be partly due to sampling error in a commonly used measure of the supply shift, the immigrant share of the workforce. After controlling for permanent factors that determine wages in specific labor markets, little variation remains in the immigrant share. We find significant sampling error in this measure of supply shifts in Canadian and U.S. Census data. Correcting for the resulting attenuation bias can substantially increase existing estimates of the wage impact of immigration.
We are grateful to Joshua Angrist, Sue Dynarski, Richard Freeman, Daniel Hamermesh, Larry Katz, Robert Moffitt, Jeffrey Smith, Douglas Staiger, and especially to Alberto Abadie for helpful comments and suggestions on earlier drafts of this paper. Most of the work on this article was completed while Dr. Aydemir was employed at Statistics Canada in Ottawa, Canada. The authors are grateful to Statistics Canada for their invaluable research support. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
Abdurrahman Aydemir & George J. Borjas, 2011. "Attenuation Bias in Measuring the Wage Impact of Immigration," Journal of Labor Economics, University of Chicago Press, vol. 29(1), pages 69-113, 01. citation courtesy of