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

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  • Eric Gould

    (Hebrew University, Shalem Center, CEPR, and IZA)

  • Omer Moav

    (Hebrew University, Royal Holloway University of London, Shalem Center, and CEPR)

Abstract

This paper examines the effect of inequality on the incentives to emigrate according to a person's education and unobservable skills (residual wage). 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. Using a unique data set on Israeli emigrants, we show that the probability of emigrating indeed increases monotonically with education. However, the relationship between residual wages and emigration rates exhibits an inverse u-shaped pattern. We build a model to explain both of these patterns by incorporating the idea that education is a "general" skill which can be transferred to a foreign country, but residual wages are composed of "general" and "country-specific skills" which are not easily transferable. We test the model's predictions by exploiting variation in the patterns of emigration across industries and occupations. Our findings are consistent with the theory, and therefore, highlight the importance of differentiating between general and "country-specific" skills in order to understand emigrant selection.

Suggested Citation

  • Eric Gould & Omer Moav, 2010. "When is "Too Much" Inequality Not Enough? The Selection of Israeli Emigrants," CReAM Discussion Paper Series 1014, Centre for Research and Analysis of Migration (CReAM), Department of Economics, University College London.
  • Handle: RePEc:crm:wpaper:1014
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    Cited by:

    1. Ran Abramitzky & Leah Boustan, 2017. "Immigration in American Economic History," Journal of Economic Literature, American Economic Association, vol. 55(4), pages 1311-1345, December.
    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, in: Erik Hanushek & Stephen Machin & Ludger Woessmann (ed.), Handbook of the Economics of Education, edition 1, volume 4, chapter 0, pages 327-439, 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. 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.
    8. 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.
    9. Cinzia Rienzo, 2014. "Residual Wage Inequality and Immigration in the USA and the UK," LABOUR, CEIS, vol. 28(3), pages 288-308, September.

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    JEL classification:

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

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