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Self-selection and the performance of return migrants: the source country perspective

Abstract

In this paper, using the framework of a Roy theoretical model, we examine the performance of return migrants in Albania. We ask two main questions: (i) Had they chosen not to migrate, what would be the performance of return migrants compared to the non-migrants? and (ii) What would be the performance of non-migrants had they decided to migrate and return? Both the selection estimates and the semi-parametric approach allow us to conclude that the flows of return migrants are negatively selected. We find that, had they decided to migrate and come back, the non-migrants would have earned more than twice the wages of return migrants.

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Notes

  1. Note that members of our focus (treated) group are those who migrated and then returned to Albania, and therefore, we do not correct for people who went abroad and did not return. We are therefore relying on the assumption that return migrants are randomly selected from the pool of immigrants. This appears to be the case for at least one major EU host country, Germany (see Constant and Massey 2003).

  2. We would like to emphasise that “return migrants” in our paper are only those who participated in the labour market upon their return to the source country after spending some time abroad. Therefore, all policy implications of our results should be considered with that in mind.

  3. Remittances have played a key role in the development process of not only Albania but other CEECs also. See Leon-Ledesma and Piracha (2004) for an analysis of the role of remittances in selected CEECs.

  4. Pyramid schemes were companies that, by claiming to be engaged in profitable investments, attracted large and increasing volumes of funds from private depositors with promises of dramatically high returns. In reality, however, depositors' funds were largely not used for “growth generating” investments, but either served to pay interest on existing deposits or were transferred by the schemes' owners to bank accounts abroad. For a detailed analysis of the pyramid scheme crisis, see Jarvis (2000).

  5. We ignore the individuals who return to spend their retired life in the source country.

  6. Mesnard (2004) analyses the choice of activity of return migrants taking into account credit constraints in the home country.

  7. This includes both pecuniary and non-pecuniary costs of migration.

  8. As was discussed in “Albanian migration: a brief background”, there are some who successfully applied for a permanent stay in Greece.

  9. Where η is the slope of the earnings function in Albania relative to the slope of the earnings function that migrants face in the host country.

  10. These data were collected within the framework of Phare-ACE project. For a detailed analysis and explanation of the data set, see Kule et al. (2002).

  11. Individuals out of the labour force are differentiated as pensioners, housewives, students, unemployed. Compared to those included in our paper, they are younger, less often married, less likely to live in cities. Those who have migrated are mainly unemployed and students, those who have no migration experience are mostly students or pensioners.

  12. The average market rate available for the three quarters of the interview period (II, III, IV, 1998) was 148.8 Lek/$ (Source: International Financial Statistics, IMF, 2001).

  13. We have introduced a variable for being paid in foreign currency as we may expect different pay settings for people who work for international organisations or multinational firms than those who work for domestic firms. We observe that those who have been abroad at least once are more likely to be hired by private firms (4% of return migrants compared to only 1% of the stayers).

  14. As mentioned in “Albanian migration: a brief background”, migration flows originating from the Northern regions of Albania are lower. This can be explained by the increased distance from Greece and/or by more uncertainties surrounding the outcomes on the Greek labour market.

  15. The property used is: \(h{\left( z \right)} = \frac{{h{\left( {\left. z \right|m = 0} \right)}{\text{prob}}{\left( {m = 0} \right)}}}{{{\text{prob}}{\left( {\left. {m = 0} \right|z} \right)}}}\) for the stayers and \(\frac{{h{\left( {\left. z \right|m = 1} \right)}{\text{prob}}{\left( {m = 1} \right)}}}{{{\text{prob}}{\left( {\left. {m = 1} \right|z} \right)}}}\) for the migrants.

  16. This result is similar to that of Ham et al. (2001) who found lower return to education for internal migrants in the United States.

  17. Overall a Chi-square test of the joint significance of the occupational variables gives a p value of 0 to the fourth decimal place for stayers and migrants.

  18. Again, only those who are currently working.

  19. We choose the term “marginal” rather than “unconditional” following Maddala (1983) and Van der Gaag and Vijverberg (1988).

  20. Our data set offers some help in identifying these increased assimilation costs faced by the stayers. They are asked to give the main reason why they did not migrate amongst eight possible answers. The results are as follows: family (16%), fear of losing the current job (12%), not having a visa (11%), love for the home country (9%), only at the sixth place comes the financial cost (6%), then being too old (5%) and health reasons (2%). No one chose the risk of losing social assistance.

  21. Dustmann and Kirchkamp (2002) showed that return migrants choosing between self-employment or wage sector tend to experience different outcomes when they return.

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Acknowledgements

We would like to thank Alan Carruth, Arnaud Chevalier, Ira Gang, Alan Manning, Roger Vickerman, an anonymous referee and participants at the Applied Econometrics Association conference, Bruxelles, Centre for Economic Performance Labour Market Workshops, London, and the 18th Annual Congress of European Economic Association, Stockholm, for helpful comments on earlier versions of the paper. This work is part of the project “Borders, Migration and Labour Market Dynamics in a Changing Europe” financed by the UK Economic and Social Research Council, Grant No L213251042. The usual disclaimer applies.

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Correspondence to Matloob Piracha.

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Responsible editor: Klaus F. Zimmermann

Appendix

Appendix

Fig. 7
figure 7

Estimated propensity scores

Fig. 8
figure 8

Estimated propensity scores

Fig. 9
figure 9

Estimated propensity scores and weights (θ 2(z))

Fig. 10
figure 10

Estimated propensity scores and weights (θ 1(z))

Table 6 Sample selection criteria
Table 7 Migrants, different specification of the wage function, dependent variable: Lw, second selection rule
Table 8 Stayers, different specification of the wage function, dependent variable: Lw, second selection rule
Table 9 Endogenous switching model, Lee (1978), first selection rule
Table 10 Endogenous switching model, Lee (1978), second selection rule
Table 11 Mean and counterfactual mean incomes for different characteristics
Table 12 Absolute advantage for different characteristics, marginal
Table 13 Comparative advantage for different characteristics, marginal

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de Coulon, A., Piracha, M. Self-selection and the performance of return migrants: the source country perspective. J Popul Econ 18, 779–807 (2005). https://doi.org/10.1007/s00148-005-0004-4

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Keywords

  • Self-selection
  • Return migrants
  • Albania

JEL Classification

  • F22
  • J61