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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.

Suggested Citation

  • Catia Batista, 2008. "Why Doesn't Labor Flow from Poor to Rich Countries? Micro Evidence from the European Integration Experience," Economics Series Working Papers 402, University of Oxford, Department of Economics.
  • Handle: RePEc:oxf:wpaper:402

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    References listed on IDEAS

    1. 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.
    2. Francesco Caselli & Silvana Tenreyro, 2006. "Is Poland the Next Spain?," NBER Chapters,in: NBER International Seminar on Macroeconomics 2004, pages 459-533 National Bureau of Economic Research, Inc.
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    5. Catia Batista, 2007. "Joining the EU: Capital Flows, Migration and Wages," Economics Series Working Papers 342, University of Oxford, Department of Economics.
    6. 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.
    7. Faini, Riccardo & Venturini, Alessandra, 1994. "Migration and Growth: The Experience of Southern Europe," CEPR Discussion Papers 964, C.E.P.R. Discussion Papers.
    8. 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, September.
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    10. Hatton, T.J. & Williamson, J.G., 1993. "Late-Comers to Mass Emigration: The Latin Experience," Harvard Institute of Economic Research Working Papers 1641, Harvard - Institute of Economic Research.
    11. Stokey, Nancy L, 1996. "Free Trade, Factor Returns, and Factor Accumulation," Journal of Economic Growth, Springer, vol. 1(4), pages 421-447, December.
    12. Daniel Chiquiar & Gordon H. Hanson, 2005. "International Migration, Self-Selection, and the Distribution of Wages: Evidence from Mexico and the United States," Journal of Political Economy, University of Chicago Press, vol. 113(2), pages 239-281, 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. A. D. Roy, 1951. "Some Thoughts On The Distribution Of Earnings," Oxford Economic Papers, Oxford University Press, vol. 3(2), pages 135-146.
    15. 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.
    16. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
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    Cited by:

    1. Bertoli, S. & Fernández-Huertas Moraga, J. & Ortega, F., 2013. "Crossing the border: Self-selection, earnings and individual migration decisions," Journal of Development Economics, Elsevier, vol. 101(C), pages 75-91.
    2. Davide, DOTTORI & I-Ling, SHEN, 2008. "Low-Skilled Immigration and th Expansion of Private Schools," Discussion Papers (ECON - Département des Sciences Economiques) 2008023, Université catholique de Louvain, Département des Sciences Economiques.
    3. Batista, Catia & McIndoe Calder, Tara & Vicente, Pedro C., 2014. "Return Migration, Self-Selection and Entrepreneurship in Mozambique," IZA Discussion Papers 8195, Institute for the Study of Labor (IZA).
    4. Catia Batista & Aitor Lacuesta & Pedro Vicente, 2009. "Micro evidence of the brain gain hypothesis: The case of Cape Verde," Working Papers 0902, Banco de España;Working Papers Homepage.
    5. World Bank, 2010. "Taking Stock of Recent Migration Flows in the European Union," World Bank Other Operational Studies 2965, The World Bank.
    6. Catia Batista & Francesco Cestari, 2016. "Migrant intentions to return: The role of migrant social networks," NOVAFRICA Working Paper Series wp1602, Universidade Nova de Lisboa, Faculdade de Economia, NOVAFRICA.
    7. Batista, Catia & Lacuesta, Aitor & Vicente, Pedro C., 2012. "Testing the ‘brain gain’ hypothesis: Micro evidence from Cape Verde," Journal of Development Economics, Elsevier, vol. 97(1), pages 32-45.
    8. Catia Batista & Francesco Cestari, 2016. "Migrant intentions to return: The role of migrant social networks," FEUNL Working Paper Series novaf:wp1602, Universidade Nova de Lisboa, Faculdade de Economia.
    9. Nurgul Ukueva, 2011. "Migration, Remittances and Growth," DEGIT Conference Papers c016_032, DEGIT, Dynamics, Economic Growth, and International Trade.
    10. repec:bla:obuest:v:79:y:2017:i:5:p:797-821 is not listed on IDEAS
    11. Batista, Catia & Lacuesta, Aitor & Vicente, Pedro C., 2007. "Brain Drain or Brain Gain? Micro Evidence from an African Success Story," IZA Discussion Papers 3035, Institute for the Study of Labor (IZA).
    12. Igor Fedotenkov, 2016. "Labour Shares, Fertility and Longevity in an OLG model," Bank of Lithuania Working Paper Series 28, Bank of Lithuania.

    More about this item


    International Migration; Economic Integration; Free Migration Policy; Wage Differentials; Migrant Self-Selection; Migration Costs; European Union;

    JEL classification:

    • F15 - International Economics - - Trade - - - Economic Integration
    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
    • O24 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Trade Policy; Factor Movement; Foreign Exchange Policy

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