Danish men who migrate outside the Nordic countries earn 38% more than those who stay, and Danish women earn 17% more than those who stay in Denmark.  This is a central finding of research by George J. Borjas, Ilpo Kauppinen and Panu Poutvaara published in the January 2019 edition of The Economic Journal, which shows that Danish emigrants are better educated and earn more than non-migrants.

The researchers wanted to test whether European countries should be concerned about losing their top talent through emigration to countries with wider income differences, such as the United States.

The authors focus on Danish citizens aged 25-54 who worked full time in the year before migration and compare them to Danish citizens with the same gender and age range who also worked full time but did not emigrate.  They found that men going to non-Nordic countries earn 38% more and women earn 17% more than those who stay in the country.

Their research also finds that migrants to other Nordic countries earn more than non-migrants but less than those who migrate outside the Nordic countries.  The difference in earnings exist for those who stayed abroad for at least five years and for those who returned within that time period.

According to the researchers, such differences are not explained by immigration policies, as the pre-migration distribution of income of emigrants to other EU countries outside the Nordic countries and Switzerland is similar to the pre-migration distribution of income of emigrants leaving Europe.

They analysed the extent to which emigrants’ higher earnings can be explained by their observable characteristics, such as education.  Their research finds that among men, observable characteristics like education, explain only about 30% of the earnings gap between migrants and non-migrants.  Among women they explain about half of the differences in earnings.  This shows that focusing only on the education of emigrants underestimates the productivity losses to European welfare states arising from the self-selection of emigrants.

What impact does this have on Denmark?  While the authors point out that about 5% of the Danish born population lives abroad, and emigration levels are comparable to other European countries, high income workers play a major role in job creation and innovation.  The authors conclude that the self-selection of emigrants from the top of the income distribution can be expected to play a larger role in the success of countries than the numbers and total income would suggest.

Self?selection of Emigrants: Theory and Evidence on Stochastic Dominance in Observable and Unobservable Characteristics’ by George J. Borjas, Ilpo Kauppinen, Panu Poutvaara is published in the January 2019 issue of The Economic Journal.

George J. Borjas

Robert W. Scrivner Professor of Economics and Social Policy | Harvard Kennedy School

Ilpo Kauppinen

Senior Researcher | VATT Institute for Economic Research

Panu Poutvaara

Professor | University of Munich and Director of the Ifo Center for International Institutional Comparisons and Migration Research | +49 89 9224 1372 | poutvaara@ifo.de