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How Important is Selection? Experimental vs Non-experimental Measures of Income Gains from Migration


  • David McKenzie

    () (The World Bank)

  • John Gibson

    (University of Waikato)

  • Steven Stillman

    (Motu Economic and Public Policy Research)


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 non-compliance 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

  • David McKenzie & John Gibson & Steven Stillman, 2006. "How Important is Selection? Experimental vs Non-experimental Measures of Income Gains from Migration," Working Papers in Economics 06/03, University of Waikato.
  • Handle: RePEc:wai:econwp:06/03

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    References listed on IDEAS

    1. A. Smith, Jeffrey & E. Todd, Petra, 2005. "Does matching overcome LaLonde's critique of nonexperimental estimators?," Journal of Econometrics, Elsevier, vol. 125(1-2), pages 305-353.
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    5. Alberto Abadie & David Drukker & Jane Leber Herr & Guido W. Imbens, 2004. "Implementing matching estimators for average treatment effects in Stata," Stata Journal, StataCorp LP, vol. 4(3), pages 290-311, September.
    6. Joshua D. Angrist, 2004. "Treatment effect heterogeneity in theory and practice," Economic Journal, Royal Economic Society, vol. 114(494), pages 52-83, March.
    7. James Heckman & Neil Hohmann & Jeffrey Smith & Michael Khoo, 2000. "Substitution and Dropout Bias in Social Experiments: A Study of an Influential Social Experiment," The Quarterly Journal of Economics, Oxford University Press, vol. 115(2), pages 651-694.
    8. Rajeev H. Dehejia & Sadek Wahba, 2002. "Propensity Score-Matching Methods For Nonexperimental Causal Studies," The Review of Economics and Statistics, MIT Press, vol. 84(1), pages 151-161, February.
    9. Ximena Clark & Timothy J. Hatton & Jeffrey G. Williamson, 2002. "Where Do U.S. Immigrants Come From, and Why?," NBER Working Papers 8998, National Bureau of Economic Research, Inc.
    10. Mckenzie, David & Rapoport, Hillel, 2007. "Network effects and the dynamics of migration and inequality: Theory and evidence from Mexico," Journal of Development Economics, Elsevier, vol. 84(1), pages 1-24, September.
    11. Dehejia, Rajeev, 2005. "Practical propensity score matching: a reply to Smith and Todd," Journal of Econometrics, Elsevier, vol. 125(1-2), pages 355-364.
    12. Borjas, George J, 1987. "Self-Selection and the Earnings of Immigrants," American Economic Review, American Economic Association, vol. 77(4), pages 531-553, September.
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    Cited by:

    1. Stillman, Steven & McKenzie, David & Gibson, John, 2009. "Migration and mental health: Evidence from a natural experiment," Journal of Health Economics, Elsevier, vol. 28(3), pages 677-687, May.
    2. de Brauw, Alan & Giles, John, 2008. "Migrant labor markets and the welfare of rural households in the developing world : evidence from China," Policy Research Working Paper Series 4585, The World Bank.
    3. David McKenzie & John Gibson & Steven Stillman, 2007. "Moving to opportunity, leaving behind what? Evaluating the initial effects of a migration policy on incomes and poverty in source areas," New Zealand Economic Papers, Taylor & Francis Journals, vol. 41(2), pages 197-223.
    4. Valerie Mueller & Abusaleh Shariff, 2011. "Preliminary Evidence On Internal Migration, Remittances, And Teen Schooling In India," Contemporary Economic Policy, Western Economic Association International, vol. 29(2), pages 207-217, April.
    5. McKenzie, David & Gibson, John & Stillman, Steven, 2013. "A land of milk and honey with streets paved with gold: Do emigrants have over-optimistic expectations about incomes abroad?," Journal of Development Economics, Elsevier, vol. 102(C), pages 116-127.
    6. Fafchamps, Marcel, 2012. "Reprint of development, agglomeration, and the organization of work," Regional Science and Urban Economics, Elsevier, vol. 42(5), pages 765-778.
    7. Rizwana Siddiqui, 2013. "Impact Evaluation of Remittances for Pakistan: Propensity Score Matching Approach," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 52(1), pages 17-44.
    8. Yang, Dean, 2009. "International Migration and Human Development," MPRA Paper 19212, University Library of Munich, Germany.
    9. David McKenzie & Caroline Theoharides & Dean Yang, 2014. "Distortions in the International Migrant Labor Market: Evidence from Filipino Migration and Wage Responses to Destination Country Economic Shocks," American Economic Journal: Applied Economics, American Economic Association, vol. 6(2), pages 49-75, April.
    10. William J. Collins & Marianne H. Wanamaker, 2014. "Selection and Economic Gains in the Great Migration of African Americans: New Evidence from Linked Census Data," American Economic Journal: Applied Economics, American Economic Association, vol. 6(1), pages 220-252, January.
    11. Fafchamps, Marcel, 2012. "Development, agglomeration, and the organization of work," Regional Science and Urban Economics, Elsevier, vol. 42(3), pages 459-472.
    12. Beatriz Vargas Urrutia, 2013. "Retornos a la educaciĆ³n y migraciĆ³n rural-urbana en Colombia," REVISTA DESARROLLO Y SOCIEDAD, UNIVERSIDAD DE LOS ANDES-CEDE, December.
    13. Kudo, Yuya, 2012. "Returns to migration : the role of educational attainment in rural Tanzania," IDE Discussion Papers 322, Institute of Developing Economies, Japan External Trade Organization(JETRO).
    14. Kudo, Yuya, 2012. "Marriage as women's old age insurance : evidence from migration and land inheritance practices in rural Tanzania," IDE Discussion Papers 368, Institute of Developing Economies, Japan External Trade Organization(JETRO).
    15. Boman, Anders, 2012. "Employment effects of extended geographic scope in job search," Labour Economics, Elsevier, vol. 19(5), pages 643-652.

    More about this item


    migration; selection; natural experiment;

    JEL classification:

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

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