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How does Emigration affect Labor Markets? Evidence from Road Construction in Brazil

Flávia Chein, Juliano Junqueira Assunção

Abstract


We study the impact of emigration on local labor markets, based on the construction of a 1,087km road in northeastern Brazil. The new road has changed population substantially, creating new cities along its path and increasing internal migration flows. We first use a reduced-form approach to estimate the effect of emigration on skill groups (defined by education and experience) - a 10 percentage point increase in the proportion of emigrants raises wages by 5%. Then, using a structural approach, we estimate cross effects among groups - although emigration typically raises wages, complementary effects determine negative impacts in some municipalities.

Keywords


migration; roads; labor supply; competitive local markets; substitution elasticities; wage effects.

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DOI: http://dx.doi.org/10.12660/bre.v99n992016.47740

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