Self-Selection of Migrant Workers: Migration Premium and (No) Returns to Skills

59 Pages Posted: 12 Jan 2004

See all articles by Eran Yashiv

Eran Yashiv

Tel Aviv University - Eitan Berglas School of Economics; CEP, LSE; IZA Institute of Labor Economics; Centre for Economic Policy Research (CEPR)

Date Written: December 2003

Abstract

Why do low-skilled workers choose to work in a foreign economy and what determines their wages? The Paper empirically implements the Roy self-selection model to study this question. It does so using a unique dataset on Palestinian workers working locally and in the Israeli economy. The data permit examination of both migrants and non-migrants on a comparable basis and are used to construct the relevant wage equations. The results show that key determinants of self-selection are a substantial migration premium, which lures migrant workers, and very low returns to observable skills in the foreign economy, which deter skilled workers. While the literature has found negative self-selection elsewhere, direct estimation of the relevant second moments - crucial for the determination of self-selection - shows that the same findings can be re-interpreted. In particular, we find positive self-selection, leading to a reduction in wage inequality and to worker assignment such that wages are equalized across workers employed in the source and in the host economies. Correcting for selection bias demonstrates that estimates of skill premia for migrants - an important issue in the immigration literature - are upwardly biased if selection is not accounted for.

Keywords: Self-selection, migrant workers, skill premia, migration premium, selection bias, wage inequality

JEL Classification: F20, J30, J60

Suggested Citation

Yashiv, Eran, Self-Selection of Migrant Workers: Migration Premium and (No) Returns to Skills (December 2003). Available at SSRN: https://ssrn.com/abstract=486949

Eran Yashiv (Contact Author)

Tel Aviv University - Eitan Berglas School of Economics ( email )

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IZA Institute of Labor Economics

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Centre for Economic Policy Research (CEPR)

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