Ideas to Action:

Independent research for global prosperity



July 3, 2008

The Place Premium: Wage Differences for Identical Workers across the U.S. Border - Working Paper 148

Are your wages determined by what you know, or where you are? This paper estimates how the wages of workers in 42 developing countries would change if the same people could work in the United States. It uses a rich new database on over two million workers around the world. A worker from the median country would earn about 2.7 times as much in the US as at home. This means that (1) for many countries, the wage gaps caused by barriers to movement across international borders are among the largest known forms of wage discrimination; (2) these gaps represent one of the largest remaining price distortions in any global market; and (3) simply allowing labor mobility can reduce a given household’s poverty to a much greater degree than most known antipoverty interventions inside developing countries.

Michael Clemens , Claudio E. Montenegro and Lant Pritchett