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How Important is Selection? Experimental vs. Non-Experimental Measures of the Income Gains from Migration


David McKenzie


World Bank - Development Research Group (DECRG); Institute for the Study of Labor (IZA)

John Gibson


University of Waikato; Motu Economic and Public Policy Research

Steven Stillman


University of Otago; Institute for the Study of Labor (IZA)

April 2006

IZA Discussion Paper No. 2087

Abstract:     
Measuring the gain in income from migration is complicated by non-random selection of migrants from the general population, making it hard to obtain an appropriate comparison group of non-migrants. This paper uses a migrant lottery to overcome this problem, providing an experimental measure of the income gains from migration. New Zealand allows a quota of Tongans to immigrate each year with a lottery used to choose amongst the excess number of applicants. A unique survey conducted by the authors in these two countries allows experimental estimates of the income gains from migration to be obtained by comparing the incomes of migrants to those who applied to migrate, but whose names were not drawn in the lottery, after allowing for the effect of noncompliance among some of those whose names were drawn. We also conducted a survey of individuals who did not apply for the lottery. Comparing this non-applicant group to the migrants enables assessment of the degree to which non-experimental methods can provide an unbiased estimate of the income gains from migration. We find evidence of migrants being positively selected in terms of both observed and unobserved skills. As a result, non-experimental methods are found to overstate the gains from migration, by 9 to 82 percent. A good instrumental variable works best, while difference-in-differences and bias-adjusted propensity-score matching also perform comparatively well.

Number of Pages in PDF File: 49

Keywords: migration, selection, natural experiment

JEL Classification: J61, F22, C21

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Date posted: April 25, 2006  

Suggested Citation

McKenzie, David and Gibson, John and Stillman, Steven, How Important is Selection? Experimental vs. Non-Experimental Measures of the Income Gains from Migration (April 2006). IZA Discussion Paper No. 2087. Available at SSRN: http://ssrn.com/abstract=898591

Contact Information

David John McKenzie (Contact Author)
World Bank - Development Research Group (DECRG) ( email )
1818 H. Street, N.W.
MSN3-311
Washington, DC 20433
United States
Institute for the Study of Labor (IZA)
P.O. Box 7240
Bonn, D-53072
Germany
John Gibson
University of Waikato ( email )
Te Raupapa
Private Bag 3105
Hamilton
New Zealand
Motu Economic and Public Policy Research
19 Milne Terrace
Island Bay
Wellington, 6002
New Zealand
Steven Stillman
University of Otago ( email )
PO Box 56
Dunedin
New Zealand
Institute for the Study of Labor (IZA)
P.O. Box 7240
Bonn, D-53072
Germany
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