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Returns to Regional Migration: Causal Effect or Selection on Wage Growth?

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Listed:
  • Fabian Kratz
  • Josef Brüderl

Abstract

Human capital theory predicts pecuniary returns to regional migration, but also positive self-selection of migrants. Therefore, when estimating the causal effect of migration one has to take care of potential self-selection. Several authors recommend using fixed effects models thereby controlling for time constant unobserved heterogeneity. However, if selection operates not only on wage level but also on wage growth conventional fixed effects models are also biased. In this paper we want to investigate, whether migrants are self-selected on wage growth and if this biases conventional fixed effects estimates of the returns to migration. We use data from the SOEP 1984-2010. First we analyze the time pattern of the wage differential between migrants and stayers to see whether they are on different wage trajectories. Second we introduce a fixed effects model with individual slopes to investigate whether conventional results are biased.

Suggested Citation

  • Fabian Kratz & Josef Brüderl, 2012. "Returns to Regional Migration: Causal Effect or Selection on Wage Growth?," SOEPpapers on Multidisciplinary Panel Data Research 494, DIW Berlin, The German Socio-Economic Panel (SOEP).
  • Handle: RePEc:diw:diwsop:diw_sp494
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    File URL: http://www.diw.de/documents/publikationen/73/diw_01.c.410726.de/diw_sp0494.pdf
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    References listed on IDEAS

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    1. Borjas, George J & Bronars, Stephen G & Trejo, Stephen J, 1992. "Assimilation and the Earnings of Young Internal Migrants," The Review of Economics and Statistics, MIT Press, vol. 74(1), pages 170-175, February.
    2. Natascha Nisic, 2009. "Labour Market Outcomes of Spatially Mobile Coupled Women: Why is the locational context important?," Schmollers Jahrbuch : Journal of Applied Social Science Studies / Zeitschrift für Wirtschafts- und Sozialwissenschaften, Duncker & Humblot, Berlin, vol. 129(2), pages 203-215.
    3. Gert G. Wagner & Joachim R. Frick & Jürgen Schupp, 2007. "The German Socio-Economic Panel Study (SOEP) – Scope, Evolution and Enhancements," Schmollers Jahrbuch : Journal of Applied Social Science Studies / Zeitschrift für Wirtschafts- und Sozialwissenschaften, Duncker & Humblot, Berlin, vol. 127(1), pages 139-169.
    4. Polachek, Solomon W. & Kim, Moon-Kak, 1994. "Panel estimates of the gender earnings gap : Individual-specific intercept and individual-specific slope models," Journal of Econometrics, Elsevier, vol. 61(1), pages 23-42, March.
    5. Chiswick, Barry R, 1978. "The Effect of Americanization on the Earnings of Foreign-born Men," Journal of Political Economy, University of Chicago Press, vol. 86(5), pages 897-921, October.
    6. Jeffrey J. Yankow, 2003. "Migration, Job Change, and Wage Growth: A New Perspective on the Pecuniary Return to Geographic Mobility," Journal of Regional Science, Wiley Blackwell, vol. 43(3), pages 483-516.
    7. Jennifer Hunt, 2004. "Are migrants more skilled than non-migrants? Repeat, return, and same-employer migrants," Canadian Journal of Economics, Canadian Economics Association, vol. 37(4), pages 830-849, November.
    8. Glaeser, Edward L & Mare, David C, 2001. "Cities and Skills," Journal of Labor Economics, University of Chicago Press, vol. 19(2), pages 316-342, April.
    9. Christopher Dougherty, 2006. "The Marriage Earnings Premium as a Distributed Fixed Effect," Journal of Human Resources, University of Wisconsin Press, vol. 41(2).
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    More about this item

    Keywords

    regional migration; causal- and selection-effects; selection on wage growth;

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers
    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population

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