Emigrants from Nordic countries are more highly educated and have higher earnings than the rest of the population
A study using recent Danish register data shows that Danes emigrating on a permanent basis have had a significantly higher earnings and educational level than the remaining population.
Migrant numbers have so far been small. But if migration increases, the selection of migrants at the upper end of earnings and educational distributions may present a challenge for welfare state funding.
According to a recent study, emigrating Danes are not only better educated than the rest of the population, they also earn more compared to Danes with a similar educational, age and family profile. Education explains less than half the earnings differences between migrants and the remaining population.
The study is the work of Ilpo Kauppinen, a researcher at the VATT Institute of Economic Research, Professor George Borjas of Harvard University and Professor Panu Poutvaara of the University of Munich.
The economists used Danish administrative statistics in their study and compared how the pre-emigration gross earnings of Danes emigrating on a permanent basis in the period 1996–2005 differ from the earnings distribution of the full population. Earnings are not compared per se, rather the income variable used in the comparison takes into account the effect of age, gender and the reference year on an individual’s earnings.
“That gives us an indicator that describes an individual’s earning potential better than income per se”, Kauppinen explains.
According to the researchers, the question of how the emigrants differ in terms of earnings potential from the remaining population in the country of origin is important for both source and destination countries. Differences between countries in income level and earnings opportunities are a key factor determining the direction of international migratory flows. One might well assume therefore that those emigrating from the Nordic countries, with their high taxation and even income distribution, will be successful persons with relatively high earnings, who will find a higher return to skills in many other countries.
The study’s findings bear this assumption out. Around 5% of Danes currently live abroad. The selection of migrants at the upper end of the income distribution may, however, pose a challenge for welfare state funding, if the number of migrants increases in future.
“The research findings demonstrate a clear positive selection in respect of emigrants. Leavers are not therefore representative of average Danes. The question of how applicable the finding is to Finland can only be resolved by examining comparable Finnish data. Nonetheless I would be surprised if Finnish statistics didn’t confirm the same phenomenon”, Kauppinen comments.
The study forms part of Ilpo Kauppinen’s doctoral thesis, examined at the University of Munich last year.
Senior Researcher Ilpo Kauppinen, +358 295 519 503
Self-Selection of Emigrants: Theory and Evidence on Stochastic Dominance in Observable and Unobservable Characteristics
VATT Working Papers 67