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Migration Magnet: The Role of Work Experience in Rural-Urban Wage Diff erentials in Mexico

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  • John P. Haisken-DeNew
  • Maren M. Michaelsen

    ()

Abstract

This study estimates separate selectivity bias corrected wage equations for formal and informal workers in rural and urban Mexico using data from the Mexican Family Life Survey (MxFLS). We control for diff erent potential selection patterns using Probit and Multinominal logit models in the fi rst step in which health, personality traits and family characteristics serve as exclusion restrictions for working per se and working in the formal sector. Oaxaca-Blinder Decompositions show that rural-urban wage inequality in the formal and informal sector is determined by diff erences in observable human capital. In the informal sector, the wage diff erential is mainly explained by diff erences in returns to experience. Furthermore, we analyse rural-to-urban migrants‘ labour market performance. The fi ndings suggest that rural-to-urban migration will continue and the informal sector will further increase.

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Bibliographic Info

Paper provided by Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen in its series Ruhr Economic Papers with number 0263.

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Length: 36 pages
Date of creation: Jun 2011
Date of revision:
Handle: RePEc:rwi:repape:0263

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Keywords: Returns to experience; rural-urban wage diff erentials; informality; internal migration; Mexico;

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References

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  1. E. D. Gould, 2007. "Cities, Workers, and Wages: A Structural Analysis of the Urban Wage Premium," Review of Economic Studies, Oxford University Press, vol. 74(2), pages 477-506.
  2. Barton H. Hamilton, 2000. "Does Entrepreneurship Pay? An Empirical Analysis of the Returns to Self-Employment," Journal of Political Economy, University of Chicago Press, vol. 108(3), pages 604-631, June.
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  4. Chang-Tai Hsieh & Peter J. Klenow, 2007. "Misallocation and Manufacturing TFP in China and India," Discussion Papers 07-006, Stanford Institute for Economic Policy Research.
  5. Stark, Oded & Taylor, J Edward, 1991. "Migration Incentives, Migration Types: The Role of Relative Deprivation," Economic Journal, Royal Economic Society, vol. 101(408), pages 1163-78, September.
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  8. Gordon H. Hanson, 2010. "Why Isn't Mexico Rich?," Journal of Economic Literature, American Economic Association, vol. 48(4), pages 987-1004, December.
  9. El Badaoui, Eliane & Strobl, Eric & Walsh, Frank, 2007. "Is There an Informal Employment Wage Penalty? Evidence from South Africa," IZA Discussion Papers 3151, Institute for the Study of Labor (IZA).
  10. Javier Arias & Oliver Azuara & Pedro Bernal & James J. Heckman & Cajeme Villarreal, 2010. "Policies To Promote Growth and Economic Efficiency in Mexico," NBER Working Papers 16554, National Bureau of Economic Research, Inc.
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  12. Maloney, William, 2003. "Informality revisited," Policy Research Working Paper Series 2965, The World Bank.
  13. Gong, Xiaodong & van Soest, Arthur & Villagomez, Elizabeth, 2000. "Mobility in the Urban Labor Market: A Panel Data Analysis for Mexico," IZA Discussion Papers 213, Institute for the Study of Labor (IZA).
  14. Douglas Marcouiller, S.J. & Veronica Ruiz de Castilla & Christopher Woodruff, 1995. "Formal Measures of the Informal Sector Wage Gap in Mexico, El Salvador, and Peru," Boston College Working Papers in Economics 294., Boston College Department of Economics.
  15. Bosch, Mariano & Maloney, William, 2008. "Cyclical movements in unemployment and informality in developing countries," Policy Research Working Paper Series 4648, The World Bank.
  16. Fields, Gary S., 1975. "Rural-urban migration, urban unemployment and underemployment, and job-search activity in LDCs," Journal of Development Economics, Elsevier, vol. 2(2), pages 165-187, June.
  17. Bargain, Olivier & Kwenda, Prudence, 2009. "The Informal Sector Wage Gap: New Evidence Using Quantile Estimations on Panel Data," IZA Discussion Papers 4286, Institute for the Study of Labor (IZA).
  18. Bosch, Mariano & Maloney, William F., 2007. "Gross Worker Flows in the Presence of Informal Labor Markets: Evidence from Mexico, 1987-2002," IZA Discussion Papers 2864, Institute for the Study of Labor (IZA).
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Cited by:
  1. Anna Klabunde, 2014. "Computational Economic Modeling of Migration," Ruhr Economic Papers 0471, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.

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