Self-Selection of Emigrants: Theory and Evidence on Stochastic Dominance in Observable and Unobservable Characteristics

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 nonmigrants. 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 preemigration 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.<p> <span style="float: left;padding-right:10px"> <img src="http://www.cesifo-group.de/dms/ifoimg/logo/cesifowp_ifoCEMIR/cesifowp_ifoCEMIR.jpg"> </span> <div style="padding-right:10px;"> This paper presents research output of the <a href="http://www.cesifo-group.de/CEMIR" target="_blank">Ifo Center of Excellence for Migration and Integration Research</a> (CEMIR) </div></p>