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How Important Is Selection? Experimental vs. Non-Experimental Measures of the Income Gains from Migration

Author

Listed:
  • McKenzie, David

    (World Bank)

  • Gibson, John

    (University of Waikato)

  • Stillman, Steven

    (Free University of Bozen/Bolzano)

Abstract

Measuring the gain in income from migration is complicated by non-random selection of migrants from the general population, making it hard to obtain an appropriate comparison group of non-migrants. This paper uses a migrant lottery to overcome this problem, providing an experimental measure of the income gains from migration. New Zealand allows a quota of Tongans to immigrate each year with a lottery used to choose amongst the excess number of applicants. A unique survey conducted by the authors in these two countries allows experimental estimates of the income gains from migration to be obtained by comparing the incomes of migrants to those who applied to migrate, but whose names were not drawn in the lottery, after allowing for the effect of noncompliance among some of those whose names were drawn. We also conducted a survey of individuals who did not apply for the lottery. Comparing this non-applicant group to the migrants enables assessment of the degree to which non-experimental methods can provide an unbiased estimate of the income gains from migration. We find evidence of migrants being positively selected in terms of both observed and unobserved skills. As a result, non-experimental methods are found to overstate the gains from migration, by 9 to 82 percent. A good instrumental variable works best, while difference-in-differences and bias-adjusted propensity-score matching also perform comparatively well.

Suggested Citation

  • McKenzie, David & Gibson, John & Stillman, Steven, 2006. "How Important Is Selection? Experimental vs. Non-Experimental Measures of the Income Gains from Migration," IZA Discussion Papers 2087, Institute of Labor Economics (IZA).
  • Handle: RePEc:iza:izadps:dp2087
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    References listed on IDEAS

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    More about this item

    Keywords

    selection; natural experiment; migration;
    All these keywords.

    JEL classification:

    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers
    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration
    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models

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