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Why Are Migrants Paid More?

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  • Alex Bryson
  • Giambattista Rossi
  • Rob Simmons

Abstract

In efficient global labour markets for very high wage workers one might expect wage differentials between migrant and domestic workers to reflect differences in labour productivity. However, using panel data on worker-firm matches in a single industry over a seven year period we find a substantial wage penalty for domestic workers which persists within firms and is only partially accounted for by individual labour productivity. We show that the differential partly reflects the superstar status of migrant workers. This superstar effect is also apparent in migrant effects on firm performance. But the wage differential also reflects domestic workers' preferences for working in their home region, an amenity for which they are prepared to take a compensating wage differential, or else are forced to accept in the face of employer monopsony power which does not affect migrant workers.

Suggested Citation

  • Alex Bryson & Giambattista Rossi & Rob Simmons, 2012. "Why Are Migrants Paid More?," CEP Discussion Papers dp1134, Centre for Economic Performance, LSE.
  • Handle: RePEc:cep:cepdps:dp1134
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    References listed on IDEAS

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    More about this item

    Keywords

    wages; migration; superstars; productivity; compensating wage differentials; sports;

    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
    • J71 - Labor and Demographic Economics - - Labor Discrimination - - - Hiring and Firing
    • M52 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects

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