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Why Do Programmers Earn More in Houston Than Hyderabad? Evidence from Randomized Processing of US Visas

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  • Michael A. Clemens

Abstract

Why do workers earn so much more in the United States than in India? This study compares the earnings of workers in the two countries in a unique setting. The product is perfectly tradable (software), technology differences are nil (they are members of the same work team), and the workers are identical in expectation (those who enter the United States are chosen by natural randomization). The results suggest that output tradability, technology, and human capital together explain much less than half of the earnings gap. Location itself may have large effects on individual workers' wages and productivity, for reasons poorly understood.

Suggested Citation

  • Michael A. Clemens, 2013. "Why Do Programmers Earn More in Houston Than Hyderabad? Evidence from Randomized Processing of US Visas," American Economic Review, American Economic Association, vol. 103(3), pages 198-202, May.
  • Handle: RePEc:aea:aecrev:v:103:y:2013:i:3:p:198-202 Note: DOI: 10.1257/aer.103.3.198
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    References listed on IDEAS

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    1. Michael Storper & Anthony J. Venables, 2004. "Buzz: face-to-face contact and the urban economy," Journal of Economic Geography, Oxford University Press, vol. 4(4), pages 351-370, August.
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    5. Michael Kremer, 1993. "The O-Ring Theory of Economic Development," The Quarterly Journal of Economics, Oxford University Press, vol. 108(3), pages 551-575.
    6. Michael A. Clemens, 2011. "Economics and Emigration: Trillion-Dollar Bills on the Sidewalk?," Journal of Economic Perspectives, American Economic Association, vol. 25(3), pages 83-106, Summer.
    7. repec:pri:indrel:dsp01t435gd01h is not listed on IDEAS
    8. Orley Ashenfelter, 2012. "Comparing Real Wage Rates: Presidential Address," American Economic Review, American Economic Association, vol. 102(2), pages 617-642, April.
    9. Suma S. Athreye, 2005. "The Indian software industry and its evolving service capability," Industrial and Corporate Change, Oxford University Press, vol. 14(3), pages 393-418, June.
    10. Adam B. Jaffe & Manuel Trajtenberg & Rebecca Henderson, 1993. "Geographic Localization of Knowledge Spillovers as Evidenced by Patent Citations," The Quarterly Journal of Economics, Oxford University Press, pages 577-598.
    11. Orley Ashenfelter, 2012. "Comparing Real Wage Rates," Working Papers 1384, Princeton University, Department of Economics, Industrial Relations Section..
    12. Simon Commander & Rupa Chanda & Mari Kangasniemi & L. Alan Winters, 2008. "The Consequences of Globalisation: India's Software Industry and Cross-border Labour Mobility -super-1," The World Economy, Wiley Blackwell, vol. 31(2), pages 187-211, February.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Sari Pekkala Kerr & William Kerr & Çağlar Özden & Christopher Parsons, 2016. "Global Talent Flows," Journal of Economic Perspectives, American Economic Association, vol. 30(4), pages 83-106, Fall.
    2. Sari Pekkala Kerr & William R. Kerr & William F. Lincoln, 2015. "Firms and the Economics of Skilled Immigration," Innovation Policy and the Economy, University of Chicago Press, pages 115-152.
    3. repec:spr:jopoec:v:30:y:2017:i:4:d:10.1007_s00148-017-0641-4 is not listed on IDEAS
    4. Murard, Elie, 2016. "Consumption and Leisure: The Welfare Impact of Migration on Family Left Behind," IZA Discussion Papers 10305, Institute for the Study of Labor (IZA).
    5. John Bound & Murat Demirci & Gaurav Khanna & Sarah Turner, 2015. "Finishing Degrees and Finding Jobs: US Higher Education and the Flow of Foreign IT Workers," Innovation Policy and the Economy, University of Chicago Press, pages 27-72.
    6. Hunt, Jennifer, 2017. "How Restricted is the Job Mobility of Skilled Temporary Work Visa Holders?," CEPR Discussion Papers 12106, C.E.P.R. Discussion Papers.
    7. Sari Pekkala Kerr & William R. Kerr & William F. Lincoln, 2015. "Firms and the Economics of Skilled Immigration," Innovation Policy and the Economy, University of Chicago Press, pages 115-152.
    8. Sari Pekkala Kerr & William Kerr & Çağlar Özden & Christopher Parsons, 2017. "High-Skilled Migration and Agglomeration," Annual Review of Economics, Annual Reviews, vol. 9(1), pages 201-234, September.
    9. John Bound & Gaurav Khanna & Nicolas Morales, 2017. "Understanding the Economic Impact of the H-1B Program on the US," NBER Chapters,in: High-Skilled Migration to the United States and its Economic Consequences National Bureau of Economic Research, Inc.
    10. William R. Kerr, 2013. "U.S. High-Skilled Immigration, Innovation, and Entrepreneurship: Empirical Approaches and Evidence," NBER Working Papers 19377, National Bureau of Economic Research, Inc.
    11. Madeline Zavodny, 2015. "Should countries auction immigrant visas?," IZA World of Labor, Institute for the Study of Labor (IZA), pages 202-202.

    More about this item

    JEL classification:

    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers
    • L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration

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