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

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  • Yashiv, Eran

Abstract

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.

Suggested Citation

  • Yashiv, Eran, 2003. "Self-Selection of Migrant Workers: Migration Premium and (no) Returns to Skills," CEPR Discussion Papers 4156, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:4156
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    References listed on IDEAS

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    1. Willis, Robert J & Rosen, Sherwin, 1979. "Education and Self-Selection," Journal of Political Economy, University of Chicago Press, vol. 87(5), pages 7-36, October.
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    4. Heckman, James, 2013. "Sample selection bias as a specification error," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 31(3), pages 129-137.
    5. 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.
    6. 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, August.
    7. Giuseppe Moscarini, 2001. "Excess Worker Reallocation," Review of Economic Studies, Oxford University Press, vol. 68(3), pages 593-612.
    8. N/A, 1989. "Annual Report," Evaluation Review, , vol. 13(3), pages 320-320, June.
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    11. A. D. Roy, 1951. "Some Thoughts On The Distribution Of Earnings," Oxford Economic Papers, Oxford University Press, vol. 3(2), pages 135-146.
    12. 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 329-363, January.
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    Citations

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    Cited by:

    1. Klaus Nowotny, 2011. "Welfare Magnets, Taxation and the Location Decisions of Migrants to the EU," WIFO Working Papers 393, WIFO.
    2. repec:wfo:wstudy:41563 is not listed on IDEAS
    3. repec:wfo:wstudy:41226 is not listed on IDEAS
    4. Peter Huber & Klaus Nowotny & Julia Bock-Schappelwein, 2010. "Qualification Structure, Over- and Under-qualification of the Foreign Born in Austria and the EU," WIFO Studies, WIFO, number 41226, July.
    5. Michael A. Quinn, 2006. "Relative Deprivation, Wage Differentials and Mexican Migration," Review of Development Economics, Wiley Blackwell, vol. 10(1), pages 135-153, February.
    6. repec:wfo:wstudy:37422 is not listed on IDEAS

    More about this item

    Keywords

    migrant workers; migration premium; selection bias; self-selection; skill premia; wage inequality;

    JEL classification:

    • F20 - International Economics - - International Factor Movements and International Business - - - General
    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
    • J60 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - General

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