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The Place Premium: Wage Differences for Identical Workers across the U.S. Border
July 28, 2008
Are your wages determined by what you know, or where you live? This paper estimates how the wages of workers in 42 developing countries would change if the same people could work in the United States. Using a new international database, CGD research fellow Michael Clemens and his co-authors find huge differences based on a worker’s location. A Nigerian man in the U.S., for example, earns about eight times as much as he would in Nigeria. The authors show that such wage gaps due to barriers to labor mobility are one of the largest price distortions in any global market and that they are much larger than the wage gaps associated with discrimination within countries, for example, in connection with gender or ethnicity.