Human Capital and the Labor Market Adjustment of Immigrants: Testing Alternative Hypotheses

In previous research on the economic adjustment of immigrants, hypotheses were generated based on the degree of the transferability of skill and the self-selection of immigrants for labor market ability. These hypotheses were found to be consistent with cross-sectional data for the United States and other countries. This chapter considers two alternative hypotheses that have been suggested: selective return migration of immigrants and the migration of those who anticipate high earnings for reasons other than ability. To compare the original and alternative models, a variety of new tests are made using cross-sectional and longitudinal data on earnings, occupation, and schooling from the censuses of population and the National Longitudinal Survey. The model of immigrant adjustment based on skill transferability and immigrant self-selection is shown to be consistent with these new tests, while the alternative hypotheses are not.

Transferability of Skills across Sectors and Heterogeneous Displacement Costs

We use rich German administrative data to estimate new measures of skill transferability between manufacturing and other sectors. These measures capture the value of workers' human capital when applied in different sectors and are directly related to workers' displacement costs. We estimate these transferability measures using a selection correction model, which addresses workers' endogenous mobility, and a novel selection instrument based on the social network of workers. Our results indicate substantial heterogeneity in how workers can transfer their skills when they move across sectors, which implies heterogeneous displacement costs that depend on the sector to which workers reallocate.

Skill Transferability, Migration, and Development:Evidence from Population Resettlement in Indonesia

We use a natural experiment in Indonesia to provide causal evidence on the role of location-specific human capital and skill transferability in shaping the spatial distribution of productivity. From 1979–1988, the Transmigration Program relocated two million migrants from rural Java and Bali to new rural settlements in the Outer Islands. Villages assigned migrants from regions with more similar agroclimatic endowments exhibit higher rice productivity and nighttime light intensity one to two decades later. We find some evidence of migrants' adaptation to agroclimatic change. Overall, our results suggest that regional productivity differences may overstate the potential gains from migration. (JEL J24, J43, J61, O13, O15, Q13, R23)