Self-selection of Emigrants: Theory and Evidence on Stochastic Dominance in Observable and Unobservable Characteristics

Abstract

The Roy model has more precise predictions about the self-selection of migrants than previously realised. The conditions shown to result in positive or negative selection in terms of expected earnings also imply a stochastic dominance relationship between the earnings distributions of migrants and non-migrants. We test these predictions using the Danish full population administrative data. We find strong evidence of positive self-selection of emigrants in terms of pre-emigration earnings and residual earnings: the income distribution for the migrants almost stochastically dominates the distribution for the non-migrants. Decomposing the self-selection in total earnings reveals that unobserved abilities play the dominant role.A central finding in the economic literature on international migration is that emigrants are not randomly selected from the population of the source countries. The nature of the non-random selection affects the level and the distribution of welfare through two major channels. First, the skill distribution of migrants affects the wage structure in both sending and receiving countries (Borjas, 2003). A second effect takes place through the public sector. Immigration creates a fiscal surplus in the receiving country if and only if the net present value of the tax payments of immigrants exceeds the net present value of the costs they impose. Both the immigration of net recipients and the emigration of net payers pose a challenge to the public treasury (Wildasin, 1991;Sinn, 1997), while immigrants who are successfully integrated with the labour market can generate a substantial surplus (Dustmann and Frattini, 2014).Beginning with Borjas (1987), there has been a great deal of interest in deriving and empirically testing models that predict how migrants differ from non-migrants. Many of these studies rely on an application of the Roy model of occupational self-selection. As long as skills are sufficiently transferable across countries, the sorting of persons across countries is mainly determined by international differences in the rate of return to skills. A country like the US would then attract high-skilled workers from more egalitarian countries (i.e. countries offering relatively low rates of return to skills) and

Emigrant selection and wages: The case of Poland

“…Particularly valuable is my focus on a country not yet studied but which experienced high emigration rates over the period analysed. Differently from Borjas et al (2019) who focus on emigration from a rich EU country (Denmark), Poland is to be considered the largest emerging country within the European context. Before the 2004 accession, average monthly earnings were 4 times lower in Poland than the average in the EU15 countries 2 and, typical of transition economies, the country experienced large fluctuations in the unemployment rate, from 10 percent in 1998 to 19 percent in 2004, and back to 7 percent in 2008.…”

“…I implement the empirical analysis of Gould and Moav (2016) for this case and extend it to the comparison of two destination countries, reviewing the role of migration policies as possible drivers of the observed outcomes. As argued by Borjas et al (2019) there is a need for further evidence to improve the understanding of the role of residual wage inequality in determining emigrant selection. The literature has so far pointed out the importance of focusing not only on observable skills but also on unobservable skills, allowing for the possibility that individuals with identical education levels have different levels of unobservable skills (Gould and Moav 2016;Borjas et al 2019).…”

“…As argued by Borjas et al (2019) there is a need for further evidence to improve the understanding of the role of residual wage inequality in determining emigrant selection. The literature has so far pointed out the importance of focusing not only on observable skills but also on unobservable skills, allowing for the possibility that individuals with identical education levels have different levels of unobservable skills (Gould and Moav 2016;Borjas et al 2019). The theoretical model is applicable only to individuals who are employed, nevertheless, my dataset allows me to analyze the characteristics of individuals who were unemployed before they emigrated.…”

Self‐Selection in Migration Between Developing Countries: The Role of Unobservable Skills of Gauteng's Migrant Population

“…Similarly, Borjas et al. () found that more than half of the difference between the expected earnings of migrants and non‐migrants arises because of differences in unobserved characteristics. The above studies on self‐selection concentrate on migration from a developing country to a developed country.…”

Self-selection of Mexican migrants in the presence of random shocks: Evidence from the Panic of 1907

“…Since Borjas (1987) formalized the Roy model (Roy 1951), migrant selection has become a prolific topic in labour economics, because it provides a framework to study migrant 'quality' in contemporary and past migration episodes (Abramitzky et al 2012;Borjas et al 2018;Chiquiar and Hanson 2005;Kosack and Ward 2014;Spitzer and Zimran 2018;among others). While the literature on migrant self-selection acknowledges that the decision to migrate depends on systemic and idiosyncratic reasons, the factors that may explain shifts in selection patterns over time remain empirically unexplored (Abramitzky and Boustan 2017: 1325).…”