Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/216443 
Authors: 
Year of Publication: 
2020
Series/Report no.: 
IZA Discussion Papers No. 13131
Publisher: 
Institute of Labor Economics (IZA), Bonn
Abstract: 
The phenomenon of workers moving from a poor to a rich economy is high on the political agenda. When a worker moves to a richer economy, what is gained by the move? The empirical challenge in giving an answer stems from the difficulty to disentangle income differences from many other determinants. Estimates are potentially biased due to substantial misspecification of the model, when omitting relevant determinants. The paper makes use of a unique data set on Palestinian workers, working locally and in Israel, that allows to isolate the pure effects of income differences with no other relevant factors. It explicitly addresses the question of what workers newly experience in the richer economy (higher productivity), what is taken from the poorer economy (human capital), and their choices in moving (self-selection). Importantly, it encompasses the constraints placed on workers in terms of the human capital skills demanded. The findings show that income differences affecting worker choice are made up of contradictory elements. Consistently with findings in the development accounting literature, productivity differences in favor of the richer economy, due to differences in TFP and in physical capital, are sizeable and operate to raise wages for movers. But lower job task values operate to lower wages for movers, who are offered manual tasks in the rich economy. The latter loss offsets the former gain. The paper emphasizes the idea that tasks are tied to locations. Workers choose a location-wage-task 'pack,' with movers getting low rewards to the skills bundled in their job tasks.
Subjects: 
movers and stayers
rich and poor economies
pure income effects
job tasks
TFP differentials
human capital differences
self-selection
skill bundle
development accounting
JEL: 
E24
J24
J31
O15
Document Type: 
Working Paper

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