Migration and Income: The Question of Self-Selection

Abstract

In recent years economists have become increasingly interested in the apparent self-selection exhibited by economic agents as they participate in market processes. Embodied in this concept is the notion that agents choose among competing alternatives at least in part on the basis of anticipated incremental returns. Rationality dictates that persons choosing a given alternative do so because they have some tangible basis for perceiving a more favorable return than those who choose otherwise. The result is that persons selecting a particular course of action tend to be non-randomly distributed within the population as a whole. As a consequence there is inherent in data which report relative returns to competing alternatives. This problem is recognized as a complicating factor in attempts to estimate returns to schooling, labor force participation, unionization, and migration, to mention a few [4; 12]. Researchers have recently addressed some of these questions in the context of econometric models which explicitly account for selectivity bias in wage/income comparisons. The problem of labor force participation is considered by Heckman [5] and Nelson [19]. The effects of unionization on wage levels have been analyzed by Lee[10], while Roberts, Maddala and Enholm[22] have examined problems associated with behavior of regulated firms. Returns to college education are reported by Kenny et.al.[8], and earnings effects of military occupational training are discussed by Trost and Warner[24]. The purpose of this paper is to describe and estimate a model of returns to migration which explicitly accounts for self-selection of migrants from the working population. The essence of the problem as it pertains to migration is summarized in a recent survey: