In April 1978, Fidel Castro announced that Cubans who wanted to leave Cuba for the United States could do so from the port of Mariel, Cuba. Within 6 month, about 125,000 (mainly) lowskill Cubans had flowed through Mariel for Miami, resulting in a sudden 7% increase labor force of Miami. David Card (Industrial and Labor Relations Review 1990) examined the effect of the Mariel boat lift on wages of low-skill workers in Miami. For African-Americans in Miami (the “treated” labor market) the unemployment rate was 8.3% (before the boat lift) and 9.6% 1981 (after the boat lift). For African-Americans in cities similar to Miami that did not experience a big influx of low-skill immigration (Atlanta, Houston, and Los Angeles — the “control” labor markets) the unemployment rate was 10.3% in 1979 (before the boat lift) and 12.6% in 1981 (after the boat lift).

1. If we assume that, without the Mariel boat lift, the unemployment rate of African Americans in Miami would have followed the same trend as African-Americans in the comparison cities, what would have happened to the black unemployment rate in Miami between 1979 and 1981? That is, what would the 1981 black unemployment rate in Miami have been?

2. Based on your answer to (a), what is the difference-in-differences estimate of the the effect of the Mariel boat lift on the black unemployment rate in Miami?

3. Is your answer in (b) what you expected? Why or why not? If not, can you think of any possible explanations for the anomaly?