How does Emigration affect Labor Markets? Evidence from Road Construction in Brazil

Abstract

We study the impact of emigration on local labor markets, based on the construction of a 1,087-km road in northeastern Brazil. The new road has changed population density substantially, creating new towns along its path and increasing internal migration flows. We first use a reduced-form approach to estimate the effect of emigration on skill groups (defined by education and experience) -a 10 percentage point increase in the proportion of emigrants (which denotes a fall in labor supply) raises wages by 5%. Then, by using a structural approach, we estimate elasticities of substitution across types of labor and between capital and labor. Based on these estimates, we calculate the price elasticities and wage effects among groups -although emigration typically raises wages, complementary effects determine negative impacts on some municipalities. On average, we estimate an overall increase of 50% in local wages due to the construction of the road.

Paving the Way to Development: Costly Migration and Labor Market Integration

“…2 Chein and Assuncao (2009) study the construction of a road in the North of Brazil as an instrument for migration to study the effect of migration on wages, but do not estimate the effect of roads on migration costs directly. the responsiveness of population to economic shocks, consistent with the results found in Monte et al (2015) for labor markets and commuting costs in the US.…”

Does skill emigration hurt unskilled workers? Theory and cross‐country evidence

“…While these studies explore the impact of emigration on remaining residents, say, on the prospect of skill acquisition or further emigration via positive externalities (see, Acharyya et al., 2019; Elsner, 2013b), it rarely discusses expected outcomes on the employment levels of unskilled workers at the source. While some attention has been devoted to the mechanism by which emigrant groups influence their own wages (Mishra, 2007 for rising Mexican wages; Elsner, 2013a on rising wages for Lithuanian men; Dustmann et al., 2015 for slightly rising Polish mid‐to‐high skill wages; Chein & Assuncao, 2016 for internal migration in Brazil; etc), an estimate of the spillover effects of skilled emigration on unskilled employment and wages is unavailable.…”