Returns to Regional Migration: Causal Effect or Selection on Wage Growth?

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in SOEPpapers on Multidisciplinary Panel Data Research at DIW BerlinThis series presents research findings based either directly on data from the German SocioEconomic Panel Study (SOEP) or using SOEP data as part of an internationally comparable data set (e.g. CNEF, ECHP, LIS, LWS, CHER/PACO). SOEP is a truly multidisciplinary household panel study covering a wide range of social and behavioral sciences: economics, sociology, psychology, survey methodology, econometrics and applied statistics, educational science, political science, public health, behavioral genetics, demography, geography, and sport science.The decision to publish a submission in SOEPpapers is made by a board of editors chosen by the DIW Berlin to represent the wide range of disciplines covered by SOEP. There is no external referee process and papers are either accepted or rejected without revision. Papers appear in this series as works in progress and may also appear elsewhere. They often represent preliminary studies and are circulated to encourage discussion. Citation of such a paper should account for its provisional character. A revised version may be requested from the author directly.Any opinions expressed in this series are those of the author(s) and not those of DIW Berlin.Research disseminated by DIW Berlin may include views on public policy issues, but the institute itself takes no institutional policy positions. AbstractHuman capital theory predicts pecuniary returns to regional migration, but also positive self-selection of migrants. Therefore, when estimating the causal effect of migration one has to take care of potential self-selection. Several authors recommend using fixed effects models thereby controlling for time constant unobserved heterogeneity. However, if selection operates not only on wage level but also on wage growth conventional fixed effects models are also biased. In this paper we want to investigate, whether migrants are self-selected on wage growth and if this biases conventional fixed effects estimates of the returns to migration. We use data from the SOEP 1984-2010. First we analyze the time pattern of the wage differential between migrants and stayers to see whether they are on different wage trajectories. Second we introduce a fixed effects model with individual slopes to investigate whether conventional results are biased.

Urban scaling and the regional divide

“…4A) thus rests on the wage trajectories of individuals who—between 1993 and 2012—left their native areas to work in relatively larger labor markets. Using longitudinal regressions, we modeled separate migration effects on log(wage) for each year following i ’s move vis-à-vis a counterfactual wage had i stayed in his native labor market area ( 39 , 40 ). To identify movers’ annual wage changes relative to expected wages in their native labor market areas, we estimatedlog yitaliciitalict=Mitaliciitalictγt+Xitaliciitalictnormalδ+αi+ϵitaliciitalict…”

Cultural biases in migration: Estimating non‐monetary migration costs

“…Thus, in 2010 nationwide prices, the wage premium has to be 26 per cent of the average wage gain in 2010 prices from internal migration. The effect size of 1 per cent per standard deviation in non‐indexed wages is sizeable when compared to estimated gains to internal migration in Germany, which are around 3 per cent for the average mover (Kratz and Brüderl ; Lehmer and Ludsteck ). The treatment effect is also sizable when compared to the most recent (2013) collective wage agreements in Germany.…”

“…First, McKenzie et al () only have one observation for pre‐treatment wages. Kratz and Brüderl () point out that internal migrants in Germany are also selected based on wage growth instead of wage levels. Thus, the parallel trends assumption of the differences‐in‐differences estimator is clearly violated.…”

The Impact of Internal Migration on the Spatial Distribution of Population in Germany over the Period 1991-2017

“…In simple terms, internal migration fl ows are the result of individual decisions to move or not to move in search of utility maximisation (e.g. Borjas et al 1992;Burda/Hunt 2001;Kratz/ Brüderl 2013). Hence, persons with high levels of education tend to migrate to regions with better labour market conditions or a higher income potential to maximise the returns on their educational investment (Becker 1975).…”