This question is about trying to understand how the flow of immigrants into a given area affect wages of natives.

(a) You have access to annual data on wages and employment across the US from 1979 to 1985. You suggest using the arrival of 125,000 Cuban immigrants in Miami between May to September 1980 ("the Mariel boatlift") to study the labor market impacts of immigrant flows. Your idea is to use a difference-in-difference comparison of wages and employment rate between Miami and four other high immigration cities: Atlanta, Houston, Los Angeles, and Tampa. What is the main concern you have about being able to use a difference-in-differences analysis?

(b) Suppose natives out-migrate in response to immigration. In which direction would this bias your estimate of the impact of immigration on wages of natives when using the evaluation strategy in (a)?

(c) Consider the "Mariel Boatlift that Didn't Happen:" In the summer of 1994, tens of thousands of Cubans boarded boats destined for Miami for a 2nd boatlift. Wishing to avoid the political fallout, the Clinton administration interceded and had these intended immigrants diverted to Guantanamo Bay. You analyze the data and find that the "Mariel Boat Lift that Didn't Happen" raised the black unemployment rate in Miami by 6.3 percentage points. What do these results imply about the evaluation strategy in (a)? Explain.