Working Paper: NBER ID: w21649
Authors: George J. Borjas; Ilpo Kauppinen; Panu Poutvaara
Abstract: We show that the Roy model has more precise predictions about the self-selection of migrants than previously realized. The same conditions that have been 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 use the Danish full population administrative data to test the predictions. We find strong evidence of positive self-selection of emigrants in terms of pre-emigration earnings: the income distribution for the migrants almost stochastically dominates the distribution for the non-migrants. This result is not driven by immigration policies in destination countries. Decomposing the self-selection in total earnings into self-selection in observable characteristics and self-selection in unobservable characteristics reveals that unobserved abilities play the dominant role.
Keywords: emigration; self-selection; stochastic dominance; observable characteristics; unobservable characteristics
JEL Codes: F22; J61
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Danish emigrants are positively selected in terms of pre-emigration earnings (J61) | earnings distribution of emigrants stochastically dominates that of non-migrants (J11) |
| unobserved abilities play a dominant role in self-selection (D80) | selection patterns consistent with predictions of the Roy model (C52) |
| statistical tests for first-order stochastic dominance (C46) | confirmation that earnings distribution of emigrants stochastically dominates that of stayers (J69) |