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Why Doesn't Labor Flow from Poor to Rich Countries? Micro Evidence from the European Integration Experience

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  • Catia Batista

Abstract

Joining the EU is a natural experiment that drastically opens the borders of richer European countries to immigration.� However, migration flows from southern Europe responded little to� free migration after 1986, despite substantial differentials in real GDP per worker.� The simple explanation we propose for this puzzle is migration costs.� We explore the implications of our costly migration model by combining individual information from two household survey datasets (Luxembourg Income Study and European Community Household Panel).� In estimating wage differentials, we account for observable characteristics, unobservable heterogeneity, and assimilation of immigrants.� Based on our theoretical framework, we identify individual migration costs: they seem to be smaller for the young and educated.� Nevertheless, we find a negative pattern of self-selection: less able workers appear to be more likely to leave.� Our results point to the importance of micro characteristics of potential migrants in determining the effectiveness of free migration policies.

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Bibliographic Info

Paper provided by University of Oxford, Department of Economics in its series Economics Series Working Papers with number 402.

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Date of creation: 01 Aug 2008
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Handle: RePEc:oxf:wpaper:402

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Related research

Keywords: International Migration; Economic Integration; Free Migration Policy; Wage Differentials; Migrant Self-Selection; Migration Costs; European Union;

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References

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  1. Francesco Caselli & Silvana Tenreyro, 2005. "Is Poland the Next Spain?," CEP Discussion Papers dp0668, Centre for Economic Performance, LSE.
  2. Faini, Riccardo & Venturini, Alessandra, 1994. "Migration and Growth: The Experience of Southern Europe," CEPR Discussion Papers 964, C.E.P.R. Discussion Papers.
  3. Chiswick, Barry R, 1978. "The Effect of Americanization on the Earnings of Foreign-born Men," Journal of Political Economy, University of Chicago Press, vol. 86(5), pages 897-921, October.
  4. André Sapir & Richard Baldwin & Daniel Cohen & Anthony Venables, 1999. "Market integration, regionalism and the global economy," ULB Institutional Repository 2013/8074, ULB -- Universite Libre de Bruxelles.
  5. Timothy J. Hatton & Jeffrey G. Williamson, 1993. "Late-Comers to Mass Emigration: The Latin Experience," NBER Historical Working Papers 0047, National Bureau of Economic Research, Inc.
  6. Stokey, Nancy L, 1996. " Free Trade, Factor Returns, and Factor Accumulation," Journal of Economic Growth, Springer, vol. 1(4), pages 421-47, December.
  7. Daniel Chiquiar & Gordon H. Hanson, 2005. "International Migration, Self-Selection, and the Distribution of Wages: Evidence from Mexico and the United States," Journal of Political Economy, University of Chicago Press, vol. 113(2), pages 239-281, April.
  8. Lucas, Robert E, Jr, 1990. "Why Doesn't Capital Flow from Rich to Poor Countries?," American Economic Review, American Economic Association, vol. 80(2), pages 92-96, May.
  9. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
  10. Per Krusell & Lee E. Ohanian & Jose-Victor Rios-Rull & Giovanni L. Violante, 1997. "Capital-skill complementarity and inequality: a macroeconomic analysis," Staff Report 239, Federal Reserve Bank of Minneapolis.
  11. Faini, Riccardo & Galli, Giampaolo & Gennari, Pietro & Rossi, Fulvio, 1997. "An empirical puzzle: Falling migration and growing unemployment differentials among Italian regions," European Economic Review, Elsevier, vol. 41(3-5), pages 571-579, April.
  12. Jennifer Hunt, 2006. "Staunching Emigration from East Germany: Age and the Determinants of Migration," Journal of the European Economic Association, MIT Press, vol. 4(5), pages 1014-1037, 09.
  13. Casey B. Mulligan & Yona Rubinstein, 2004. "The Closing of the Gender Gap as a Roy Model Illusion," NBER Working Papers 10892, National Bureau of Economic Research, Inc.
  14. Catia Batista, 2007. "Joining the EU: Capital Flows, Migration and Wages," Economics Series Working Papers 342, University of Oxford, Department of Economics.
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Cited by:
  1. Davide, DOTTORI & I-Ling, SHEN, 2008. "Low-Skilled Immigration and th Expansion of Private Schools," Discussion Papers (ECON - Département des Sciences Economiques) 2008023, Université catholique de Louvain, Département des Sciences Economiques.
  2. Batista, Catia & Lacuesta, Aitor & Vicente, Pedro C., 2007. "Brain Drain or Brain Gain? Micro Evidence from an African Success Story," IZA Discussion Papers 3035, Institute for the Study of Labor (IZA).
  3. Batista, Catia & Lacuesta, Aitor & Vicente, Pedro C., 2012. "Testing the ‘brain gain’ hypothesis: Micro evidence from Cape Verde," Journal of Development Economics, Elsevier, vol. 97(1), pages 32-45.
  4. Nurgul Ukueva, 2011. "Migration, Remittances and Growth," DEGIT Conference Papers c016_032, DEGIT, Dynamics, Economic Growth, and International Trade.
  5. World Bank, 2010. "Taking Stock of Recent Migration Flows in the European Union," World Bank Other Operational Studies 2965, The World Bank.
  6. Catia Batista & Aitor Lacuesta & Pedro Vicente, 2009. "Micro evidence of the brain gain hypothesis: The case of Cape Verde," Banco de Espa�a Working Papers 0902, Banco de Espa�a.
  7. Bertoli, S. & Fernández-Huertas Moraga, J. & Ortega, F., 2013. "Crossing the border: Self-selection, earnings and individual migration decisions," Journal of Development Economics, Elsevier, vol. 101(C), pages 75-91.

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