Ruhr Economic Papers

Ruhr Economic Papers #263

Migration Magnet: The Role of Work Experience in Rural-Urban Wage Differentials in Mexico

by John P. Haisken-DeNew and Maren M. Michaelsen

RWI, RUB, 06/2011, 35 S./p., 8 Euro, ISBN 978-3-86788-307-8



This study estimates separate selectivity bias corrected wage equations for formal and
informal workers in rural and urban Mexico using data from the Mexican Family Life
Survey (MxFLS). We control for different potential selection patterns using Probit and
Multinominal logit models in the first step in which health, personality traits and family
characteristics serve as exclusion restrictions for working per se and working in the
formal sector. Oaxaca-Blinder Decompositions show that rural-urban wage inequality
in the formal and informal sector is determined by differences in observable human
capital. In the informal sector, the wage differential is mainly explained by differences
in returns to experience. Furthermore, we analyse rural-to-urban migrants‘ labour
market performance. The findings suggest that rural-to-urban migration will continue
and the informal sector will further increase.

JEL-Classification: J24, J31, R23, Q15

Keywords: Returns to experience; rural-urban wage differentials; informality; internal migration; Mexico