Measuring the Spatial Misallocation of Labor: The Returns to India-Gulf Guest Work in a Natural Experiment

Michael Clemens

No 501, Working Papers from Center for Global Development

Abstract: ‘Guest workers’ earn higher wages overseas on temporary low-skill employment visas. This wage effect can quantify global inefficiencies in the pure spatial allocation of labor between poorer and richer countries. But rigorous estimates are rare, complicated by migrant self-selection. This paper tests the effects of guest work on Indian applicants to a construction job in the United Arab Emirates, where a crisis exogenously influenced job placement. Guest work raised the return to labor by a factor of four, implying large spatial inefficiency. Short-term effects on households were modest. Effects on information, debt, and later migration were incompatible with systematic fraud.

Keywords: income; human capital; migration; labor; mobility; guest work; india; gulf; construction; worker; selection; migrant; temporary; visa; wage; education; crisis; low-skill; unskilled; credit; exploited; naive; regret; slavery; trafficking; debt; coerced; cheated (search for similar items in EconPapers)
JEL-codes: F22 J6 O12 O16 O19 (search for similar items in EconPapers)
Pages: 51 pages
Date: 2019-01-31
New Economics Papers: this item is included in nep-ara, nep-lab and nep-mig
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Citations: View citations in EconPapers (1)

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Working Paper: Measuring the Spatial Misallocation of Labor: The Returns to India-Gulf Guest Work in a Natural Experiment (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:cgd:wpaper:501

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