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The Place Premium: Wage Differences for Identical Workers across the U.S. Border

Michael Clemens, Claudio Montenegro and Lant Pritchett

No 148, Working Papers from Center for Global Development

Abstract: We compare the wages of workers inside the United States to the wages of observably identical workers outside the United States—controlling for country of birth, country of education, years of education, work experience, sex, and ruralurban residence. This is made possible by new and uniquely rich microdata on the wages of over two million individual formal-sector wage-earners in 43 countries. We then use five independent methods to correct these estimates for unobserved differences between the productivity of migrants and non-migrants, as well as for the wage effects of natural barriers to international movement in the absence of policy barriers. We also introduce a selection model to estimate how migrants’ wage gains depend on their position in the distribution of unobserved wage determinants both at the origin and at the destination, as well as the relationship between these positions. For example, in the median wage gap country, a typical Bolivian-born, Bolivianeducated, prime-age urban male formal-sector wage worker with moderate schooling makes 4 times as much in the US as in Bolivia. Following all adjustments for selectivity and compensating differentials we estimate that the wages of a Bolivian worker of equal intrinsic productivity, willing to move, would be higher by a factor of 2.7 solely by working in the United States. While this is the median, this ratio is as high as 8.4 (for Nigeria). We document that (1) for many countries, the wage gaps caused by barriers to movement across international borders are among the largest known forms of wage discrimination; (2) these gaps represent one of the largest remaining price distortions in any global market; and (3) these gaps imply that imply allowing labor mobility can reduce a given household’s poverty to a much greater degree than most known in situ antipoverty interventions.

Keywords: wage; migration; economic development (search for similar items in EconPapers)
JEL-codes: F22 J61 J71 O15 (search for similar items in EconPapers)
Pages: 55 pages
Date: 2008-07
New Economics Papers: this item is included in nep-dev, nep-lab and nep-mig
References: Add references at CitEc
Citations: View citations in EconPapers (109)

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Related works:
Working Paper: The Place Premium: Wage Differences for Identical Workers across the US Border (2010) Downloads
Working Paper: The Place Premium: Wage Differences for Identical Workers across the US Border (2009) Downloads
Working Paper: The Place Premium: Wage Differences for Identical Workers Across the US Border (2009) Downloads
Working Paper: The place premium: wage differences for identical workers across the US border (2008) Downloads
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