Self-Selection in Migration and Returns to Unobservable Skills

Benoit Dostie and Pierre Leger

No 1942, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: Several papers have tested the empirical validity of the migration models proposed by Borjas (1987) and Borjas, Bronars, and Trejo (1992). However, to our knowledge, none has been able to disentangle the separate impact of observable and unobservable individual characteristics, and their respective returns across different locations, on an individual's decision to migrate. We build a model in which individuals sort, in part, on potential earnings - where earnings across different locations are a function of both observable and unobservable characteristics. We focus on the inter-provincial migration patterns of Canadian physicians. We choose this particular group for several reasons including the fact that they are paid on a fee-for-service basis. Since wage rates are exogenous, earning differentials are driven by differences in productivity. We then estimate a mixed conditional-logit model to determine the effects of individual and destination-specific characteristics (particularly earnings differentials) on physician location decisions. We find, among other things, that high-productivity physicians (based on unobservables) are more likely to migrate to provinces where the productivity premium is greater, while low-productivity physicians are more likely to migrate to areas where the productivity premium is lower. These results are consistent with a modified Borjas model of self-selection in migration based on both unobservables and observables.

Keywords: productivity; migration; longitudinal data; earnings; self-selection (search for similar items in EconPapers)
JEL-codes: C23 C35 J24 J61 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2006-01
New Economics Papers: this item is included in nep-dcm and nep-hrm
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Citations: View citations in EconPapers (6)

Published - published in: Journal of Population Economics, 2009, 22(4), 1005-1024

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Working Paper: Self-selection in migration and returns to unobservable skills (2006)
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