The return to migrant experience

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Studying Mexican laborers, Steffen Reinhold and Kevin Thom estimate a substantial return to US work experience, possibly as large as the return to Mexican education.

There is a growing literature assessing the effects of out-migration on the economies of migrant-sending countries. Research on this topic has been dominated by two main strands: one exploring the consequences of skilled migration (the “brain drain”), and one focusing on the determinants and effects of remittances. However, if migration is temporary and migrants eventually return home, there is another channel at work, which we call the skill-upgrading of return migrants. Migrants may be accumulating skills while working abroad that are transferable to the labor markets in their home country. If these individuals eventually move back home, they return as potentially more skilled and productive workers. This paper presents an empirical analysis of this phenomenon among migrants who return to Mexico after spending some time abroad in the United States…

We use data from the Mexican Migrant Project (MMP) and the Mexican Census to document the relationship between past U.S. migration experience and the labor market earnings of return migrants in Mexico. Our baseline specification suggests that there is a 2.7% return to a year of U.S. migration experience in the Mexican labor market. This exceeds the estimated return to age at every point in the life-cycle, and we cannot reject the null hypothesis that this is equal to the return to education…

We find evidence that much of the return to migration can be accounted for by occupation-specific job experience. The return to migration experience is largest for migrants who worked in occupations in the United States that match their current occupation in Mexico. Indeed, the return to a year of this kind of job-relevant migration experience is estimated to be a little less than 5.2% in the whole sample, and as high as 9.3% when restricting the sample to unskilled manufacturing workers. It is noteworthy that our basic estimate of the return to a year of job-relevant migration experience is almost twice as large as our estimate of the return to a year of education…

We also find a greater return to years of documented migration experience, but this seems to be related to the accumulation of relevant job experience. Individuals on documented migratory trips are more likely to find jobs that end up matching their occupation back in Mexico, and there also appears to be a greater return to relevant migration experience if it is accumulated with legal documents…

If job-relevant migration experience is highly rewarded in the Mexican labor market, policymakers interested in encouraging return migration and limiting visa overstaying might wish to design temporary worker programs with the skill-upgrading incentive in mind. For example, programs that allow workers to move between employers and otherwise place less restrictions on job search might allow workers to more easily find jobs similar to those available to them in Mexico.

The authors use a model and several controls to try to address concerns about self-selection amongst migrants and the endogeneity of trip duration; check out the full paper to judge for yourself.

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