Why Doesn't Labor Flow from Poor to Rich Countries? Micro Evidence from the European Integration Experience

Joining the EU is a natural experiment that drastically opens the borders of richer European countries to immigration.� However, migration flows from southern Europe responded little to� free migration after 1986, despite substantial differentials in real GDP per worker.� The simple explanation we propose for this puzzle is migration costs.� We explore the implications of our costly migration model by combining individual information from two household survey datasets (Luxembourg Income Study and European Community Household Panel).� In estimating wage differentials, we account for observable characteristics, unobservable heterogeneity, and assimilation of immigrants.� Based on our theoretical framework, we identify individual migration costs: they seem to be smaller for the young and educated.� Nevertheless, we find a negative pattern of self-selection: less able workers appear to be more likely to leave.� Our results point to the importance of micro characteristics of potential migrants in determining the effectiveness of free migration policies.International Migration, Economic Integration, Free Migration Policy, Wage Differentials, Migrant Self-Selection, Migration Costs, European Union