Self-Selection of Emigrants: Theory and Evidence on Stochastic Dominance in Observable and Unobservable Characteristics
Borjas, George J.; Kauppinen, Ilpo; Poutvaara, Panu (2019)
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Borjas, George J.
Oxford University Press
The Roy model has more precise predictions about the self-selection of migrants than previously realised. The conditions 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 test these predictions using the Danish full population administrative data. We find strong evidence of positive self-selection of emigrants in terms of pre-emigration earnings and residual earnings: the income distribution for the migrants almost stochastically dominates the distribution for the non-migrants. Decomposing the self-selection in total earnings reveals that unobserved abilities play the dominant role.