IAE-CSIC and IZA Francesc Ortega

Most empirical studies of international migration flows rely exclusively on macro data. However, the literature on internal migration suggests that not accounting for self-selection may be a serious concern. We bridge these two literatures by analyzing a very interesting episode in international migration for which we are able to gather individual-level data covering all relevant countries, namely the exodus of Ecuadorians to Spain and the US in the aftermath of the economic collapse in 1999. Specifically, we produce selection-corrected predictions of counterfactual individual earnings and use them to estimate a discrete-choice migration model that allows for correlated errors across destinations and a rich structure of migration costs. We have three main findings. First, our estimates confirm the need to relax the independence of irrelevant alternatives assumption. Second, the size of migration flows is significantly affected by earnings differentials between the origin and the destinations. Third, our estimates imply that differences in migration costs across destinations are crucial in explaining the observed pattern of migration