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Measuring the Spatial Misallocation of Labor: The Returns to India-Gulf Guest Work in a Natural Experiment

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  • Clemens, Michael A.

    (George Mason University)

Abstract

'Guest workers' earn higher wages overseas on temporary low-skill employment visas. This wage effect can quantify global inefficiencies in the pure spatial allocation of labor between poorer and richer countries. But rigorous estimates are rare, complicated by migrant self-selection. This paper tests the effects of guest work on Indian applicants to a construction job in the United Arab Emirates, where a crisis exogenously influenced job placement. Guest work raised the return to labor by a factor of four, implying large spatial inefficiency. Short-term effects on households were modest. Effects on information, debt, and later migration were incompatible with systematic fraud.

Suggested Citation

  • Clemens, Michael A., 2019. "Measuring the Spatial Misallocation of Labor: The Returns to India-Gulf Guest Work in a Natural Experiment," IZA Discussion Papers 12095, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp12095
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    More about this item

    Keywords

    income; human capital; migration; labor; mobility; guest work; India; gulf; construction; worker; selection; migrant; temporary; visa; wage; education; crisis; low-skill; unskilled; credit; exploited; naive; regret; slavery; trafficking; debt; coerced; cheated;
    All these keywords.

    JEL classification:

    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration
    • J6 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • O19 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - International Linkages to Development; Role of International Organizations

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