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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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  1. 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.
  2. Caselli, Francesco & Tenreyro, Silvana, 2005. "Is Poland the Next Spain?," CEPR Discussion Papers 4877, C.E.P.R. Discussion Papers.
  3. 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.
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  6. Catia Batista, 2007. "Joining the EU: Capital Flows, Migration and Wages," Economics Series Working Papers 342, University of Oxford, Department of Economics.
  7. 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.
  8. Per Krusell & Lee E. Ohanian & JosÈ-Victor RÌos-Rull & Giovanni L. Violante, 2000. "Capital-Skill Complementarity and Inequality: A Macroeconomic Analysis," Econometrica, Econometric Society, vol. 68(5), pages 1029-1054, September.
  9. 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.
  10. 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.
  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. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
  13. Stokey, Nancy L, 1996. " Free Trade, Factor Returns, and Factor Accumulation," Journal of Economic Growth, Springer, vol. 1(4), pages 421-47, December.
  14. 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.
  15. Faini, Riccardo & Venturini, Alessandra, 1994. "Migration and Growth: The Experience of Southern Europe," CEPR Discussion Papers 964, C.E.P.R. Discussion Papers.
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