Ilpo Kauppinen, Panu Poutvaara, and I have just finished a paper that examines the selection characterizing emigrants from Denmark, one of the richest and most redistributive European welfare states.
The paper makes a neat theoretical contribution. It derives the conditions that determine whether the skill distribution of the emigrants stochastically dominates (or is stochastically dominated by) the skill distribution of the stayers. Because the rewards to skills in Denmark are low (relative to practically all possible destinations), the model predicts that the emigrants will be positively selected, and that the skill distribution of the movers will stochastically dominate that of the stayers.
Our analysis of administrative data for the entire Danish population between 1995 and 2010 strongly confirms the implications of the model. Denmark is indeed seeing an outflow of its most skilled workers. And that is one of the consequences that a very generous welfare state must learn to live with.
The paper is forthcoming in the Economic Journal.
Haven’t we been told over and over and over again that higher levels of immigration do not lower the wages of American workers? So what’s this I read in Politico:
President Donald Trump’s harsh criticism of immigration programs and Congress’ refusal to lift a cap on work visas meant many seasonal businesses had to hire American this summer — and pay their workers more. That’s good news for Trump, for U.S. workers, and for supporters of Trump’s “American First” agenda, but business groups complain that increased spending on wages will ultimately cost jobs and sap company profits.
Maybe someone should write a paper entitled “The Labor Demand Curve is Downward Sloping.”