Income Maximization and the Selection and Sorting of International Migrants

Two prominent features of international labor movements are that more educated individuals are more likely to emigrate (positive selection) and more-educated migrants are more likely to settle in destination countries with high rewards to skill (positive sorting). Using data on emigrant stocks by schooling level and source country in OECD destinations, we find that a simple model of income maximization can account for both phenomena. Results on selection show that migrants for a source-destination pair are more educated relative to non-migrants, the larger is the skill-related difference in earnings between the destination country and the source. Results on sorting indicate that the relative stock of more-educated migrants in a destination is increasing in the level earnings difference between high and low-skilled workers. We use our framework to compare alternative specifications of international migration, estimate the magnitude of migration costs by source-destination pair, and assess the contribution of wage differences to how migrants sort themselves across destination countries.

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