A quirk in the administrative process for granting temporary skilled-worker visas to the United States in 2007 and 2008 caused the U.S. government to randomize which visa applications it processed. This resulted in an exogenous change in the country of location for those workers. The effect of location on earnings is established by following the winners and losers of the visa lottery in the personnel records of a single major multinational software firm…
Location alone accounts for roughly three quarters of international wage gaps in this occupation. Under plausible assumptions about competition in the industry, and given the near-perfect tradability of the output, these findings suggest large differences in worker productivity caused exclusively by local, nontraded inputs accessible in different countries.
More evidence from labor mobility lotteries