Migration, Self-Selection and Income Inequality: An International Analysis

In the context of an emerging focus on highly skilled migration throughout the OECD area, the question under which circumstances migrants can be expected to be relatively skilled is of particular importance. Borjas has analysed the relation between the income distribution and the skills of migrants. His self-selection model predicts that immigrants from countries with a higher income inequality tend to be negatively selected (i.e., less skilled than the average worker in both host and source countries). According to other models based on the human capital theory of migration, however, migrants can be expected to be relatively skilled. Empirical tests of Borjas' much-disputed negative self-selection hypothesis generally rely on immigration data, particularly to the US, and may therefore be biased due to host-country specifics such as network migration and the impact of migration policy. This paper analyses the relationship between country-specific emigration propensities and each country's score on various indices of income inequality with a rich international microdata set. The main result is that highly-skilled persons are more inclined to migrate, though a higher income inequality attenuates the positive selectivity. Copyright WWZ and Helbing & Lichtenhahn Verlag AG 2004.