The Place Premium: Wage Differences for Identical Workers Across the U.S. Border

67 Pages Posted: 10 Aug 2008 Last revised: 29 Sep 2009

See all articles by Michael A. Clemens

Michael A. Clemens

Center for Global Development; IZA-Institute for the Study of Labor

Claudio E. Montenegro

World Bank Group; Universidad de Chile, Economics Department

Lant Pritchett

Harvard University - Harvard Kennedy School (HKS); Center for Global Development

Multiple version iconThere are 2 versions of this paper

Date Written: January 15, 2009

Abstract

We estimate the "place premium"-the wage gain that accrues to foreign workers who arrive to work in the United States. First, we estimate the predicted, purchasing-power adjusted wages of people inside and outside the United States who are otherwise observably identical-with the same country of birth, country of education, years of education, work experience, sex, and rural or urban residence. We use new and uniquely rich micro-data on the wages and characteristics of over two million individual formal-sector wage-earners in 43 countries (including the US). Second, we examine the extent to which these wage ratios for observably equivalent workers may overstate the gains to a marginal mover because movers may be positively selected on unobservable productivity in their home country. New evidence for nine of the countries, combined with a range of existing evidence, suggests that this overstatement can be significant, but is typically modest in magnitude. Third, we estimate the degree to which policy barriers to labor movement in and of themselves sustain the place premium, by bounding the premium observed under self-selected migration alone. Finally, we show that the policy-induced portion of the place premium in wages represents one of the largest remaining price distortions in any global market; is much larger than wage discrimination in spatially integrated markets; and makes labor mobility capable of reducing households' poverty at the margin by much more than any known in situ intervention.

Keywords: Labor, Immigration, International Economics, Microeconomics, International Affairs, Globalization, International Development

JEL Classification: F22, J61, J71, O15

Suggested Citation

Clemens, Michael Andrew and Montenegro, Claudio E. and Pritchett, Lant, The Place Premium: Wage Differences for Identical Workers Across the U.S. Border (January 15, 2009). HKS Working Paper No. RWP09-004, Center for Global Development Working Paper No. 148, Available at SSRN: https://ssrn.com/abstract=1211427 or http://dx.doi.org/10.2139/ssrn.1211427

Michael Andrew Clemens (Contact Author)

Center for Global Development ( email )

2055 L St. NW
5th floor
Washington, DC 20036
United States

IZA-Institute for the Study of Labor ( email )

HOME PAGE: http://www.iza.org/profile?key=4270

Claudio E. Montenegro

World Bank Group ( email )

1818 H. Street, N.W.
MSN3-311
Washington, DC 20433
United States

Universidad de Chile, Economics Department

Diagonal Paraguay 257
Torre 26, Of. 1801
Santiago
Chile

Lant Pritchett

Harvard University - Harvard Kennedy School (HKS) ( email )

79 John F. Kennedy Street
Cambridge, MA 02138
United States
617-496-4562 (Phone)
617-496-2554 (Fax)

HOME PAGE: http://ksghome.harvard.edu/~lpritch/

Center for Global Development

2055 L St. NW
5th floor
Washington, DC 20036
United States

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
138
Abstract Views
1,647
rank
67,472
PlumX Metrics