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Figure 5. Hatton and Williamson’s Test of Crowding OutNotes: The rates graphed are the net migrant flows over the decade divided by the average native-bornpopulation. Thus 0.08 represents an 8 percent inflow over a ten-year period or an average annualmigration rate of eight-tenths of 1 percent. The state names are indicated by a two-letter code: CT,Connecticut; IL, Illinois; IN, Indiana; MA, Massachusetts; ME, Maine; MI, Michigan; NH, NewHampshire; NJ, New Jersey; NY, New York; OH, Ohio; PA, Pennsylvania; RI, Rhode Island; and VT,Vermont. The plotted point for Wisconsin is the small dot partially hidden by the plotted observationfor New Hampshire.Source: Eldridge and Thomas 1964, Tables A1.11, A1.12, and A1.14.142In Figure 5 we present the same data that Hatton and Williamson usein their analysis. How is it that they reached their seemingly oppositeconclusion that the arrival of 100 foreigners prompted the out-migration of40 natives? We can best explain the logic of their argument by reference toFigure 6. Begin with an initial equilibrium wage in, say, the Massachusettslabor market of W 0with total employment consisting entirely of residentworkers, given by R 0. Now let there be a demand shock that shifts thedemand for labor curve out from D 0to D 1. In the absence of immigration,the wage would rise to W hand resident employment would increase toR h. Now let M foreign-born workers respond to the wage increase bymoving to Massachusetts. This shifts the supply of labor curve out to S 1,reduces the equilibrium wage to W 1,and reduces resident employment toR 1. The “crowding out” of natives that Hatton and Williamson measureis not a reduction in native employment to a level below R 0. Rather, it isthe difference between the hypothetical resident employment increase toR hand the actual employment R 1. In other words, natives and immigrantswere both moving to the same dynamic locations. As they accurately put it,“strong labour demand crowding in and foreign-born immigrant crowding