Migration Experience and Earnings in the Mexican Labor Market

Abstract

We present a theoretical and empirical analysis of the relationship between U.S. migration experience and earnings in the Mexican labor market. We use our model to analyze the effects of self-selection and endogeneity on OLS estimates of the return to migration experience in the Mexican labor market. Under plausible assumptions, OLS estimates provide a lower bound on the true average return to migration experience among return migrants. Using Mexican Migration Project (MMP) data, we find a return to migration experience of about 2.2 percent per year. Our estimates are robust to the inclusion of proxies for unobserved skill. A comparison with patterns in the 1995 Mexican Population and Dwelling Count suggests that our results are robust across data sets and are driven by a relationship between migration experience and wages, not hours worked. We also explore the plausibility of multiple mechanisms that could explain this relationship. We find the most evidence for the theory that individuals are acquiring occupation-specific work experience in the United States. The return to a year of occupation-specific migration experience is estimated to be as high as 8.7 percent for some occupations.