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Why Doesn't Labor Flow from Poor to Rich Countries? Micro Evidence from the European Integration Experience

  • Catia Batista

Joining the EU is a natural experiment that drastically opens the borders of richer European countries to immigration.� However, migration flows from southern Europe responded little to� free migration after 1986, despite substantial differentials in real GDP per worker.� The simple explanation we propose for this puzzle is migration costs.� We explore the implications of our costly migration model by combining individual information from two household survey datasets (Luxembourg Income Study and European Community Household Panel).� In estimating wage differentials, we account for observable characteristics, unobservable heterogeneity, and assimilation of immigrants.� Based on our theoretical framework, we identify individual migration costs: they seem to be smaller for the young and educated.� Nevertheless, we find a negative pattern of self-selection: less able workers appear to be more likely to leave.� Our results point to the importance of micro characteristics of potential migrants in determining the effectiveness of free migration policies.

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Paper provided by University of Oxford, Department of Economics in its series Economics Series Working Papers with number 402.

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Date of creation: 01 Aug 2008
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Handle: RePEc:oxf:wpaper:402
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Web page: http://www.economics.ox.ac.uk/
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  1. Stokey, Nancy L, 1996. " Free Trade, Factor Returns, and Factor Accumulation," Journal of Economic Growth, Springer, vol. 1(4), pages 421-47, December.
  2. Lucas, Robert E, Jr, 1990. "Why Doesn't Capital Flow from Rich to Poor Countries?," American Economic Review, American Economic Association, vol. 80(2), pages 92-96, May.
  3. Francesco Caselli & Silvana Tenreyro, 2005. "Is Poland the Next Spain?," CEP Discussion Papers dp0668, Centre for Economic Performance, LSE.
  4. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
  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. Daniel Chiquiar & Gordon H. Hanson, 2002. "International Migration, Self-Selection, and the Distribution of Wages: Evidence from Mexico and the United States," NBER Working Papers 9242, National Bureau of Economic Research, Inc.
  7. Timothy J. Hatton & Jeffrey G. Williamson, 1993. "Late-Comers to Mass Emigration: The Latin Experience," NBER Historical Working Papers 0047, National Bureau of Economic Research, Inc.
  8. Per Krusell & Lee E. Ohanian & Jose-Victor Rios-Rull & Giovanni L. Violante, 1997. "Capital-skill complementarity and inequality: a macroeconomic analysis," Staff Report 239, Federal Reserve Bank of Minneapolis.
  9. Faini, Riccardo & Venturini, Alessandra, 1994. "Migration and Growth: The Experience of Southern Europe," CEPR Discussion Papers 964, C.E.P.R. Discussion Papers.
  10. Faini, Riccardo & Galli, Giampaolo & Gennari, Pietro & Rossi, Fulvio, 1997. "An empirical puzzle: Falling migration and growing unemployment differentials among Italian regions," European Economic Review, Elsevier, vol. 41(3-5), pages 571-579, April.
  11. André Sapir & Richard Baldwin & Daniel Cohen & Anthony Venables, 1999. "Market integration, regionalism and the global economy," ULB Institutional Repository 2013/8074, ULB -- Universite Libre de Bruxelles.
  12. Freeman, Richard B., 1993. "Immigration from poor to wealthy countries : Experience of the United States," European Economic Review, Elsevier, vol. 37(2-3), pages 443-451, April.
  13. Casey B. Mulligan & Yona Rubinstein, 2004. "The Closing of the Gender Gap as a Roy Model Illusion," NBER Working Papers 10892, National Bureau of Economic Research, Inc.
  14. Catia Batista, 2007. "Joining the EU: Capital Flows, Migration and Wages," Economics Series Working Papers 342, University of Oxford, Department of Economics.
  15. Jennifer Hunt, 2006. "Staunching Emigration from East Germany: Age and the Determinants of Migration," Journal of the European Economic Association, MIT Press, vol. 4(5), pages 1014-1037, 09.
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