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Cover of Working Paper 501
January 31, 2019

Measuring the Spatial Misallocation of Labor: The Returns to India-Gulf Guest Work in a Natural Experiment - Working Paper 501

‘Guest workers’ earn higher wages overseas on temporary low-skill employment visas. This wage gap can be used to measure gaps in the productivity of workers due to where they are, not who they are. This paper estimates the effects of guest work on Indian applicants to a construction job in the United Arab Emirates, where an economic crisis allocated guest work opportunities as-good-as-randomly among several thousand families. Guest work raised the return to poor families' labor by a factor of four, with little evidence of systematic fraud.