Joop Hartog is Fellow of IZA (Bonn), CESifo (München), AIAS and Tinbergen Institute (Amsterdam). Work on this project was begun when Hartog was Erskine Visitor at the University of Canterbury, Christchurch New Zealand. Rainer Winkelmann is Fellow of CEPR and IZA (Bonn). This paper is produced as part of a CEPR research programme on European Migration from Economic Analysis to Policy Response, supported by a grant from the Commission of the European Communities under its Human Capital and Mobility Programme (no. ERBCHRXCT940515).It was presented at the European Society for Population Economics meetings in Bonn, June 2000. We gratefully acknowledge comments by Justin Lee Tobias, Jacques Poot, Ed Vytlacil, an anonymous referee and Paul Schultz. Responsible editor: T. Paul Schultz.