Paper: San (2023)

Read as part of a referee report assignment of the PhD workshop in applied economics (2023-2024) at UCL.
== Summary ==
=== Introduction ===
Research Q: "Whether labor abundance/scarcity encourages or discourages technical advance is one of the oldest debates in economics."
Acemoglu (2010) theoretically shows that the direction of the effect depends on whether technical advance reduces or increases the marginal product of labor. Whether labor scarcity may induce technical advance in practice, however, is an open empirical question. Technical advance included technology creation and adaption Previous papers have empirically studied the latter, but not creation. This paper offers an empirical test for the effect of labor supply on the creation of new technologies.
To do so, it analyzes a large exogenous shock to the labor supply in the US agricultural sector caused by the termination of a set of agreements (Bracero agreements) to regulate bilateral flows of temporary low-skill labor, between the US and Mexico in 1964. Varying substantially between crops, Bracero workers accounted for about 11 percent of the total seasonal farm workforce in 1964.
Objectives of the paper:
# Document the creation of new technologies caused by this labor supply shock. They find that crops with a higher share of Bracero workers have a relatively higher number of patents issues than crop with lower Bracero worker shares. Effect was immediate, and patents remained elevated for these crops for more than 15 years. (also mentions two robustness checks)
# Study the effect of labor supply decrease on technology related to less or more labor-intensive tasks. Triple difference estimates show the effect is larger for technology related to more labor-intensive tasks. If such technologies are relatively labor-saving, this would suggest that labor scarcity induces more labor-saving than labor-augmenting technology.
# Study the impact of the termination of the Bracero program on the profitability of farm businesses. Using information from the US agricultural census, they find that more-exposed counties experienced a greater decline in farm values after the shock relative to less-exposed counties (for states participating in Bracero). This suggests that a negative shock to the supply of low-skilled labor/immigration restrictions, is harmful to farm owners even in the medium and long run, despite the positive technology reaction.
=== I. Theoretical Framework ===
=== II. Historical Background and Data ===
==== A. Bracero Program ====
The wartime Bracero agreement between the US and Mexico to use Mexican workers on US farms started in 1942, and ended in 1964. OVer that time, it allowed over 4 million Mexican agricultural workers to migrate legally, with n average 335,000 workers employed annually. The principal policy goal of ending the program was to improve labor-market conditions for US workers by reducing labor supply.
==== B. Data ====
* Sample consists of 16 crops that used 4,000 or more person-months of foreign labor in 1964.
* Outcome variable: Crop-year-level patents: innovation activity by crop in each year is measure by #USPTO by crop-year. To account for quality, also use #patents weighted by #forward-citations. Focus on harvesting and moving patents as most Braceros worked in harvesting. Uses an algorithm to classify patents by crop based on the text of the patent (title, abstract, claims and description). The date of the 'innovation' is the patent application date. This results in a total of 2,563 patents for harvesting and mowing of the set of 16 crops between 1948 and 1985.
* Independent variable: Exposure to Bracero/shock: the share of workers that are Bracero workers in the year before termination 1964. While direct data on of Bracero workers by crop is not available, from 1948-1964, 94.5 percent of temporary foreign workers in US agriculture were Mexican. They use the share of foreign seasonal workers in 1964 as a proxy for the Bracero worker share. 
=== III. Agricultural Innovation and Patenting in the US ===
Some descriptives comparing sample patents trends to overall patents trends. [the exact function of this paragraph is insufficiently clear]
=== IV. Effects of Labor Scarcity on Invention in the US ===
==== A. Baseline Specification ====
The main estimating equation is given by:
\ln [ \mathbb{E} (Innovation_{it} | X_{it}) ] = \beta \cdot ForeignShare_{i} \cdot post_t + \gamma_i + \delta_t
Here, the dependent variable is the number of patents at the crop-year level, i,t.ForeignShare_iis the share of foreign workers of total seasonal workers for a given crop in 1964. post_tis an dummy equal to zero before 1965, and equal to one starting in 1965. \gamma_i are dummies for crop fixed effects, and \delta_t are dummies for calendar-year fixed effects. X_{i,t}are the independent variables on the right-hand-side of the regression equation.
Main findings are here.
==== B. Robustness Checks ====
Skipped. Not very interesting.
==== C. The Decision about Bracero Workers and IV Estimation ====
blablaboring
=== V. Effects by Type of Technology ===
Not being able to classify technologies as labor-replacing or labor-augmenting, using labor intensity of a task (where also the task has to be classified) seems somewhat speculative. 
=== VI. The Impact on Farm Owners ===
They want to see the effect on profits of farms, but don't have profits data. Instead, they use land-value per acre by country-year from the US Census of Agriculture for 1950-1982. They estimate the regression equation
\ln(value_{ct}) = \sum_{\tau = 1950}^{1982} \beta_\tau \cdot \textbf{1}(t = \tau) \cdot Exposure_c + \gamma_c + \delta_t + \epsilon_{ct}
with county and time fixed effects, and whereExposure_c = \sum_i^{16} ForeignShare_i \cdot AcrageShare_{ic}is the exposure of a county by summing the foreign labor share times the acreage used for each of the sixteen crops. 
Results: they find that farm land values significantly decreased in Bracero states, but not in non-Bracero states. This is not surprising, since if substituting labor for technology before 1964, farms would have presumably done so.
=== VII. Conclusion ===