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

47 Pages Posted: 20 Apr 2016

See all articles by David J. McKenzie

David J. McKenzie

World Bank - Development Research Group (DECRG); IZA Institute of Labor Economics

John Gibson

University of Waikato; Motu Economic and Public Policy Research

Steven Stillman

Free University of Bozen-Bolzano; IZA Institute of Labor Economics

Date Written: May 1, 2006

Abstract

Measuring the gain in income from migration is complicated by non-random selection of migrants from the general population, making it difficult 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 to choose among 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 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 non-compliance among some of those whose names were drawn. The authors also conducted a survey of individuals who did not apply for the lottery. Comparing this non-applicant group with the migrants enables assessment of the degree to which non-experimental methods can provide an unbiased estimate of the income gains from migration. They 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.

Keywords: Migration, Selection, Natural Experiment

JEL Classification: J61, F22, C21

Suggested Citation

McKenzie, David John and Gibson, John and Stillman, Steven, How Important is Selection? Experimental Versus Non-Experimental Measures of the Income Gains from Migration (May 1, 2006). World Bank Policy Research Working Paper No. 3906, Available at SSRN: https://ssrn.com/abstract=917477

David John McKenzie (Contact Author)

World Bank - Development Research Group (DECRG) ( email )

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

IZA Institute of Labor Economics ( email )

P.O. Box 7240
Bonn, D-53072
Germany

John Gibson

University of Waikato ( email )

Te Raupapa
Private Bag 3105
Hamilton, 3240
New Zealand

Motu Economic and Public Policy Research

19 Milne Terrace
Island Bay
Wellington, 6002
New Zealand

Steven Stillman

Free University of Bozen-Bolzano ( email )

Via Sernesi 1
39100 Bozen-Bolzano (BZ), Bozen 39100
Italy

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

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