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Why Doesn't Labor Flow from Poor to Rich Countries? Micro Evidence from the European Integration Experience

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  • Catia Batista

Abstract

Joining the EU is a natural experiment that drastically opens the borders of richer European countries to immigration. However, migration flows from southern Europe responded little to free migration after 1986, despite substantial differentials in real GDP per worker. The simple explanation we propose for this puzzle is migration costs. We explore the implications of our costly migration model by combining individual information from two household survey datasets (Luxembourg Income Study and European Community Household Panel). In estimating wage differentials, we account for observable characteristics, unobservable heterogeneity, and assimilation of immigrants. Based on our theoretical framework, we identify individual migration costs: they seem to be smaller for the young and educated. Nevertheless, we find a negative pattern of self-selection: less able workers appear to be more likely to leave. Our results point to the importance of micro characteristics of potential migrants in determining the effectiveness of free migration policies.

Suggested Citation

  • Catia Batista, 2008. "Why Doesn't Labor Flow from Poor to Rich Countries? Micro Evidence from the European Integration Experience," Economics Series Working Papers 402, University of Oxford, Department of Economics.
    • Handle: RePEc:oxf:wpaper:402
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    Cited by:

    1. Catia Batista & Aitor Lacuesta & Pedro Vicente, 2009. "Micro evidence of the brain gain hypothesis: The case of Cape Verde," Working Papers 0902, Banco de España.
    2. Dean Carson, 2011. "Skilled labour migration flows to Australia’s Northern Territory 2001-2006 beyond periphery?," Australian Journal of Labour Economics (AJLE), Bankwest Curtin Economics Centre (BCEC), Curtin Business School, vol. 14(1), pages 15-33.
    3. Davide, DOTTORI & I-Ling, SHEN, 2008. "Low-Skilled Immigration and th Expansion of Private Schools," Discussion Papers (ECON - Département des Sciences Economiques) 2008023, Université catholique de Louvain, Département des Sciences Economiques.
    4. Batista, Catia & Lacuesta, Aitor & Vicente, Pedro C., 2007. "Brain Drain or Brain Gain? Micro Evidence from an African Success Story," IZA Discussion Papers 3035, Institute of Labor Economics (IZA).
    5. Bertoli, S. & Fernández-Huertas Moraga, J. & Ortega, F., 2013. "Crossing the border: Self-selection, earnings and individual migration decisions," Journal of Development Economics, Elsevier, vol. 101(C), pages 75-91.
    6. Batista, Catia & McIndoe Calder, Tara & Vicente, Pedro C., 2014. "Return Migration, Self-Selection and Entrepreneurship in Mozambique," IZA Discussion Papers 8195, Institute of Labor Economics (IZA).
    7. World Bank, 2010. "Taking Stock of Recent Migration Flows in the European Union," World Bank Publications - Reports 2965, The World Bank Group.
    8. Catia Batista & Francesco Cestari, 2016. "Migrant intentions to return: The role of migrant social networks," NOVAFRICA Working Paper Series wp1602, Universidade Nova de Lisboa, Nova School of Business and Economics, NOVAFRICA.
    9. Batista, Catia & Lacuesta, Aitor & Vicente, Pedro C., 2012. "Testing the ‘brain gain’ hypothesis: Micro evidence from Cape Verde," Journal of Development Economics, Elsevier, vol. 97(1), pages 32-45.
    10. Catia Batista & Francesco Cestari, 2016. "Migrant intentions to return: The role of migrant social networks," FEUNL Working Paper Series novaf:wp1602, Universidade Nova de Lisboa, Faculdade de Economia.
    11. Nurgul Ukueva, 2011. "Migration, Remittances and Growth," DEGIT Conference Papers c016_032, DEGIT, Dynamics, Economic Growth, and International Trade.
    12. Catia Batista & Tara McIndoe-Calder & Pedro C. Vicente, 2017. "Return Migration, Self-selection and Entrepreneurship," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 79(5), pages 797-821, October.
    13. Igor Fedotenkov, 2016. "Labour Shares, Fertility and Longevity in an OLG model," Bank of Lithuania Working Paper Series 28, Bank of Lithuania.

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    More about this item

    Keywords

    International Migration; Economic Integration; Free Migration Policy; Wage Differentials; Migrant Self-Selection; Migration Costs; European Union;
    All these keywords.

    JEL classification:

    • F15 - International Economics - - Trade - - - Economic Integration
    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
    • O24 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Trade Policy; Factor Movement; Foreign Exchange Policy

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