Post-Enlargement Return Migrants' Earnings Premium: Evidence from Latvia

43 Pages Posted: 19 Sep 2008 Last revised: 30 Sep 2008

Date Written: September 17, 2008

Abstract

The paper exploits a recent survey of over ten thousand economically active residents of Latvia; about 5% of respondents have worked abroad over the last three years, while 12% have family members with such experience. Post-enlargement labor migration from Latvia has been predominantly low-skilled, yet return migrants when compared to stayers are, on average, more educated and less likely to work as unskilled manuals. We combine instrumental variable and propensity score matching methods to study the effect of foreign experience on earnings. Results suggest that return migrants are neither positively nor negatively selected in terms of earnings. However, after controlling for worker demographic characteristics and education, as well as foreign and unemployment experience of family members, returnees command a substantial (15% on average, more than 20% among men, and 6% among women) earnings' premium. Accounting for variety of job characteristics leaves the gap unchanged among all workers, narrows it down somewhat among men, but slightly extends among women. In the upper quartile of earnings distribution the unexplained gap in favor of return migrants exceeds 40%, while in the bottom quartile it is negative; this pattern persists also in subpopulations split by gender, ethnicity, occupation, or education. A simple behavioral model of remigration helps to explain such heterogeneity.

Keywords: return migration, selection, earnings gap, propensity score matching, causal effect, decomposition

JEL Classification: F22, J61, J31, C14

Suggested Citation

Hazans, Mihails, Post-Enlargement Return Migrants' Earnings Premium: Evidence from Latvia (September 17, 2008). Available at SSRN: https://ssrn.com/abstract=1269728 or http://dx.doi.org/10.2139/ssrn.1269728

Mihails Hazans (Contact Author)

University of Latvia ( email )

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Riga, LV 1050
Latvia
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HOME PAGE: http://www.lu.lv/eng/

IZA ( email )

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Germany

HOME PAGE: http://www.iza.org/profile?key=1142

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