Inequality and the (self-)selection of international migrants: Theory and novel evidence

This paper analyses the (self-)selection of migrants between countries which have substantial differences in the inequality of earnings and income levels. In an extended version of the Roy-model we consider migration costs, which tend to grow less than proportional with the income level. As a consequence, migrants can be favourably self-selected although the inequality of earnings is larger in the destination relative to the sending country. Based on a novel panel data set, covering migration from 143 sending countries all over the world into the 6 main receiving countries in the OECD from 1975 to 2000, we examine the factors which drive the selection bias of the migrant population empirically. The descriptive statistics indicate that migrants tend to be positively (self-)selected although the inequality in earnings is larger in the destination relative to the sending countries. Our estimation results suggest that both, a higher inequality in the distribution of earnings in the receiving and the sending country increases the skill level of the migrant population relative to that of the population in the sending countries. Moreover, the positive selection bias decreases with the income level of the sending country at a given income differential. Finally, migration barriers and distance affect the selection bias positively.