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Self-Selection of Migrant Workers: Migration Premium and (no) Returns to Skills

  • Yashiv, Eran
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    Why do low-skilled workers choose to work in a foreign economy and what determines their wages? The Paper empirically implements the Roy self-selection model to study this question. It does so using a unique dataset on Palestinian workers working locally and in the Israeli economy. The data permit examination of both migrants and non-migrants on a comparable basis and are used to construct the relevant wage equations. The results show that key determinants of self-selection are a substantial migration premium, which lures migrant workers, and very low returns to observable skills in the foreign economy, which deter skilled workers. While the literature has found negative self-selection elsewhere, direct estimation of the relevant second moments - crucial for the determination of self selection - shows that the same findings can be re-interpreted. In particular, we find positive self-selection, leading to a reduction in wage inequality and to worker assignment such that wages are equalized across workers employed in the source and in the host economies. Correcting for selection bias demonstrates that estimates of skill premia for migrants - an important issue in the immigration literature - are upwardly biased if selection is not accounted for.

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    Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 4156.

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    Date of creation: Dec 2003
    Date of revision:
    Handle: RePEc:cpr:ceprdp:4156
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    1. repec:ilo:ilowps:338944 is not listed on IDEAS
    2. Joshua D. Angrist, 1995. "Short-Run Demand for Palestinian Labor," Working papers 95-16, Massachusetts Institute of Technology (MIT), Department of Economics.
    3. Sarit Cohen-Goldner & Zvi Eckstein, 2008. "Labor Mobility Of Immigrants: Training, Experience, Language, And Opportunities," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 49(3), pages 837-872, 08.
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    5. Heckman, James J, 1979. "Sample Selection Bias as a Specification Error," Econometrica, Econometric Society, vol. 47(1), pages 153-61, January.
    6. Heckman, James J & Sedlacek, Guilherme L, 1990. "Self-selection and the Distribution of Hourly Wages," Journal of Labor Economics, University of Chicago Press, vol. 8(1), pages S329-63, January.
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    8. Giuseppe Moscarini, 2005. "Job Matching and the Wage Distribution," Econometrica, Econometric Society, vol. 73(2), pages 481-516, 03.
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    10. Willis, Robert J., 1987. "Wage determinants: A survey and reinterpretation of human capital earnings functions," Handbook of Labor Economics, in: O. Ashenfelter & R. Layard (ed.), Handbook of Labor Economics, edition 1, volume 1, chapter 10, pages 525-602 Elsevier.
    11. Oaxaca, Ronald L. & Ransom, Michael R., 1994. "On discrimination and the decomposition of wage differentials," Journal of Econometrics, Elsevier, vol. 61(1), pages 5-21, March.
    12. Borjas, George J., 1999. "The economic analysis of immigration," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 28, pages 1697-1760 Elsevier.
    13. Eli Berman & Zaur Rzakhanov, 2000. "Fertility, Migration, and Altruism," NBER Working Papers 7545, National Bureau of Economic Research, Inc.
    14. Borjas, George J, 1987. "Self-Selection and the Earnings of Immigrants," American Economic Review, American Economic Association, vol. 77(4), pages 531-53, September.
    15. Rosen, Sherwin, 1978. "Substitution and Division of Labour," Economica, London School of Economics and Political Science, vol. 45(179), pages 235-50, August.
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