Research on the labor market impact of immigration typically relies on a single-good model of production with separable capital. This article discusses theory and evidence that suggest that this standard model is too simple to capture the labor market impact of immigration. A reasonable level of capital-skill complementarity, for which there is considerable support outside research on immigration, alone reduces the relative wage impact of immigration by 40 percent compared to simulations with skill-neutral capital. Other models in which the production structure responds to skill mix changes, including models with endogenous choice of technique, directed technical change, or human capital spillovers, can also imply the impact of immigration is considerably different than in the standard model. This article discusses new research which tries to credibly evaluate such models using immigration-induced variation in skill mix, an approach with further potential, and evidence that immigration impacts innovation and firm formation. Ethan G. Lewis Department of Economics Dartmouth College 6106 Rockefeller Hall Hanover, NH 03755 and NBER ethan.g.lewis@dartmouth.edu

Science, technology, engineering, and math (STEM) workers are essential to American innovation and competitiveness in an increasingly dynamic and global marketplace. In this report, we examine demographic disparities in STEM education and find that educational attainment may affect equality of opportunity in these critical, high-quality jobs of the future. We find that regardless of race and Hispanic origin, higher college graduation rates are associated with higher shares of workers with STEM jobs. But non-Hispanic Whites and Asians are much more likely than other minority groups to have a bachelor’s degree. Other key findings of this report include: Non-Hispanic Whites comprise the largest group of STEM workers, accounting for about seven out of ten STEM worker, which aligns closely with their share of the overall workforce; Non-Hispanic Asians are most likely (42 percent) to graduate college with a STEM degree, while the propensities of other groups are fairly similar (17-22 percent); half of all non-Hispanic Asian workers with STEM degrees have STEM jobs, compared to 30% of Hispanics and non-Hispanic Black and American Indian and Alaska Native workers; one in five STEM workers is foreign-born, of which 63 percent come from Asia; STEM workers in all demographic groups, including the foreign-born, earn more than their non-STEM counterparts. Hispanics and non-Hispanic Blacks receive a significantly larger STEM premium than do non-Hispanic Whites.

Our science, technology, engineering and math (STEM) workforce is crucial to America’s innovative capacity and global competitiveness. Yet women are vastly underrepresented in STEM jobs and among STEM degree holders despite making up nearly half of the U.S. workforce and half of the college-educated workforce. That leaves an untapped opportunity to expand STEM employment in the United States, even as there is wide agreement that the nation must do more to improve its competitiveness.Although women fill close to half of all jobs in the U.S. economy, they hold less than 25 percent of STEM jobs. This has been the case throughout the past decade, even as college-educated women have increased their share of the overall workforce.Women with STEM jobs earned 33 percent more than comparable women in non-STEM jobs – considerably higher than the STEM premium for men. As a result, the gender wage gap is smaller in STEM jobs than in non-STEM jobs.Women hold a disproportionately low share of STEM undergraduate degrees, particularly in engineering.Women with a STEM degree are less likely than their male counterparts to work in a STEM occupation; they are more likely to work in education or healthcare.There are many possible factors contributing to the discrepancy of women and men in STEM jobs, including: a lack of female role models, gender stereotyping, and less family-friendly flexibility in the STEM fields. Regardless of the causes, the findings of this report provide evidence of a need to encourage and support women in STEM.

The introduction and diffusion of personal computers are widely viewed as a technological revolution. Using U.S. metropolitan area–level panel data, this paper asks whether links between PC adoption, educational attainment, and the return to skill conform to a model of technological revolutions in which the speed and extent of adoption are endogenous. The model implies that cities will adjust differently to the arrival of a more skill-intensive means of production, with the returns to skill increasing most where skill is abundant and its return is low. We show that the cross-city data fit many of the predictions of the model during the period 1980–2000, the PC diffusion era.

It is often asserted that a highly educated workforce is vital to improving the competitive position of American businesses, especially by boosting entrepreneurship. To examine this contention, we use population Census data and a new panel data of startup firms, to examine how the education and skill level of the local labor force are related to the creation and success of new businesses. This paper studies relationship between education, entrepreneurship, and businesses outcomes, and considers simultaneously both the education of the entrepreneur and of the workforce where the entrepreneurs operate their businesses. Consistent with this simultaneous focus, our initial results indicate that more educated entrepreneurs tend to be located in metropolitan areas with more educated workforces. Moreover, highly educated areas have above average entrepreneurship rates. Finally, the level of education of entrepreneurs is strongly related to positive business outcomes, especially for college graduates compared to those with less than a four-year degree.

Opinions expressed in the Economic Review do not necessarily reflect the views of the management of the Federal Reserve Bank of San Francisco or the Federal Reserve System. E 1 *This article updates and expands work in Daly and Valletta (2004). We thank Fred Furlong and participants at the 2008 Western Regional Science meetings for useful suggestions. Opinions expressed do not necessarily reflect the views of the management of the Federal Reserve Bank of San Francisco or the Board of Governors of the Federal Reserve System.

This Economic Letter summarizes several papers presented at the symposium Outlook for Future Productivity Growth hosted November 14, 2008, by the Federal Reserve Bank of San Francisco's Center for the Study of Innovation and Productivity (CSIP). The papers are listed at the end and most are available online.

After being emblematic of the U.S. economic surge in the late 1990s, urban areas that specialize in information technology (IT) products struggled in the aftermath of the IT spending bust, with most experiencing deeper and longer periods of economic decline than the nation as a whole. Seven years later, most have recovered, but only a few have regained the prominence of earlier years. In this paper, we consider the rise, the fall, and the recovery of urban IT centers and distinguish between the factors leading to temporary gains and those contributing to a more lasting growth path. Specifically, we examine the initial characteristics of the most prominent IT centers, linking these characteristics to a discussion of economic research concerning the sources of growth in urban industrial centers. We then follow these centers through the IT bust and subsequent economic recovery. The results indicate that, although each of our IT centers was hit hard by the IT bust beginning in 2000, the full impact of the decline and the subsequent pace of recovery varied considerably with the size, density, and composition of the local IT sector. The overall experience of the IT sector and the factors that ultimately seemed to separate those urban areas that succeeded from those that struggled suggest that inputs to the process such as education, research networks, and flexibility matter more than picking the right industry.

This Economic Letter summarizes the papers presented at the conference “Financial Innovations and the Real Economy” held at the Federal Reserve Bank of San Francisco by the Bank’s Center for the Study of Innovation and Productivity on November 16–17, 2006.

We evaluate the importance of three different channels for explaining the recent performance of subprime mortgages. First, the riskiness of the subprime borrowing pool may have increased. Second, pockets of regional economic weakness may have helped push a larger proportion of subprime borrowers into delinquency. Third, for a variety of reasons, the recent history of local house price appreciation and the degree of house price deceleration may have affected delinquency rates on subprime mortgages. While we find a role for all three candidate explanations, patterns in recent house price appreciation are far and away the best single predictor of delinquency levels and changes in delinquencies. Importantly, after controlling for the current level of house price appreciation, measures of house price deceleration remain significant predictors of changes in subprime delinquencies. The results point to a possible role for changes in house price expectations for explaining changes in delinquencies.

In this Economic Letter, we explore how the pace of and change in house-price appreciation can affect the incentives and opportunities for borrowers in a market to avoid delinquencies and foreclosures. For instance, with likely gains in home equity in markets where house prices have risen significantly, a homeowner should have greater incentives and opportunities to keep a mortgage loan current. Indeed, we show that markets that recently experienced greater house-price appreciation tended to have lower delinquency rates and smaller increases in delinquency rates. We also find that metropolitan areas where house prices decelerated the most in 2006 have experienced the largest increases in subprime delinquency rates. One of several possible explanations for this relationship is that, in the face of sharp declines in the pace of house-price appreciation, some borrowers may have lowered their expectations about future appreciation rates, and, hence, the attractiveness of the investment component of homeownership also declined.

Over the past several decades, innovations in the mortgage market have benefited consumers through a variety of channels. Innovations include the lowering of down payment requirements, increased flexibility in repayment schedules, and the reduction of costs associated with extracting equity from homes. To ascertain the ways in which these innovations would alter spending on housing, we develop a model of the home buying and mortgage choice decision that produces a number of testable implications. For instance, the lowering of down payment requirements should result in homeownership rates increasing, especially for households that are traditionally cash constrained. In fact, we show that between 1994 and 2004, the homeownership rate for young and low-income households rose sharply. Increased flexibility of repayment schedules should assist households in smoothing their housing consumption choices. Empirically, we document that households have increased the share of their income spent on housing by a substantial margin. The result is robust to the changing composition of households and also to regional location. Households that have been traditionally cash constrained have increased their housing expenditures but tend to have low mortgage rates, suggesting that these households may be financing their increased housing consumption with alternative, flexible mortgage products.

According to several measures, the difference in wages between men and women, the so-called male-female wage (MFWG), has shrunk substantially--by about half--over the past several decades. This phenomenon has been the subject of much research, speculation, and contention. For example, some seek to explain why the gap narrowed so dramatically in the 1980s only to narrow much more slowly in subsequent years. Others have considered the role of new technology, which may have helped level the playing field between the sexes; this view recalls the rise of office work at the turn of the 20th century, which is also thought to have benefited women (Goldin 1990). ; In this Letter, we focus on an important portion of the research in this area, particularly as it pertains to the very sharp decline in the MFWG during the 1980s. We summarize three of the more well-known possible explanations: declining discrimination against women, rising skills and workforce attachment of women, and changing selection. While each has strong merit in its own right, none has come to be the dominant explanation. We speculate that it may be fruitful, though challenging, to consider whether these three explanations worked together, occurring simultaneously and reinforcing one another, to result in the sharp narrowing of the MFWG in the 1980s.

With households' property debt surging, the use of adjustable-rate mortgages increasing, and interest rates rising, some observers have raised concerns about households' ability to service that debt. To gain a better idea of the distribution of property debt burdens and how it has changed over time, this Economic Letter presents data from the Survey of Consumer Finances (SCF), which contains information on different types of property debt, debt service, and income. The SCF data show that property debt burdens in 2004 were only slightly higher than they were in the mid-1990s. Also, although the use of adjustable-rate mortgages has increased, many households that have some of their property debt in these instruments have fairly low debt burdens, suggesting that they could successfully adapt if their mortgage payments were to increase.