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When is "Too Much" Inequality Not Enough? The Selection of Israeli Emigrants

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  • Gould, Eric D
  • Moav, Omer

Abstract

This paper examines the effect of inequality on the incentives to emigrate according to a person’s observable and unobservable skills. Borjas (1987) shows that higher skilled individuals are more likely to emigrate than lower skilled individuals when the returns to skill are higher in a potential foreign destination. Building on this framework, we develop a model which shows that this prediction holds for observable skills like education which are "general" in the sense of being easily transferable to another country. However, we show that the relationship between unobservable skills and the probability of emigrating is an inverse U-shape - since unobservable skills are a mixture of "general skills" and "country-specific skills" which are not easily transferable. We examine the predictions of our model with a unique data set containing information on who emigrates from Israel between 1995 and 2004, combined with a full set of demographic and labor market variables for both movers and stayers in 1995. By exploiting differences between Israel and the United States in the returns to observable (education) and unobservable skills across different sectors (industries and occupations), we find strong evidence that a lower return to unobservable skills in Israel versus the US entices higher ability Israelis to leave the country. Also, we find that virtually the entire positive relationship between education and the rate of emigration would be eliminated if the returns to education were increased in Israel to US levels within each industry. Overall, the results strongly support our model and the importance of differentiating between general and "country-specific" skills in the analysis of immigrant selection.

Suggested Citation

  • Gould, Eric D & Moav, Omer, 2008. "When is "Too Much" Inequality Not Enough? The Selection of Israeli Emigrants," CEPR Discussion Papers 6955, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:6955
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    References listed on IDEAS

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    1. Michèle V. K. Belot & Timothy J. Hatton, 2012. "Immigrant Selection in the OECD," Scandinavian Journal of Economics, Wiley Blackwell, vol. 114(4), pages 1105-1128, December.
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    1. repec:aea:jeclit:v:55:y:2017:i:4:p:1311-45 is not listed on IDEAS
    2. Rienzo, Cinzia, 2008. "Residual Wage Inequality and Immigration in the UK and the US," MPRA Paper 30279, University Library of Munich, Germany, revised Mar 2011.
    3. Dustmann, Christian & Glitz, Albrecht, 2011. "Migration and Education," Handbook of the Economics of Education, Elsevier.
    4. Ran Abramitzky & Leah Platt Boustan & Katherine Eriksson, 2012. "Europe's Tired, Poor, Huddled Masses: Self-Selection and Economic Outcomes in the Age of Mass Migration," American Economic Review, American Economic Association, vol. 102(5), pages 1832-1856, August.
    5. Michael Clemens & Claudio Montenegro & Lant Pritchett, 2008. "The Place Premium: Wage Differences for Identical Workers across the U.S. Border," Working Papers 148, Center for Global Development.
    6. Mountford, Andrew & Rapoport, Hillel, 2011. "The brain drain and the world distribution of income," Journal of Development Economics, Elsevier, vol. 95(1), pages 4-17, May.
    7. Ran Abramitzky & Leah Boustan, 2017. "Immigration in American Economic History," Journal of Economic Literature, American Economic Association, vol. 55(4), pages 1311-1345, December.
    8. Adnan, Wifag, 2015. "Who gets to cross the border? The impact of mobility restrictions on labor flows in the West Bank," Labour Economics, Elsevier, vol. 34(C), pages 86-99.
    9. Dustmann, Christian & Fadlon, Itzhak & Weiss, Yoram, 2011. "Return migration, human capital accumulation and the brain drain," Journal of Development Economics, Elsevier, vol. 95(1), pages 58-67, May.
    10. Cinzia Rienzo, 2014. "Residual Wage Inequality and Immigration in the USA and the UK," LABOUR, CEIS, vol. 28(3), pages 288-308, September.

    More about this item

    Keywords

    country-specific skills; emigration; general skills; income inequality; return to education;

    JEL classification:

    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers

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