Consequences of Labour Migration on Wages and Employment: Evidence from India

Abstract

This paper evaluates the impact of migration on the labour market outcomes of nonmigrant workers in India using unit-level data from the 'Employment Unemployment and Migration Survey' (NSSO 64th Round, 2007-2008. After correcting for endogeneity bias of migration using an instrument variable approach, the overall results of the study suggest that the inflow of migrant workers increases the wages of non-migrant workers but does not affect their employment. Disaggregating the analysis by sectors, the study finds a positive wage effect in the formal sector, which is more pronounced among the high-skilled workers. In the informal sector, the results indicate an adverse employment effect among both high-and low-skilled workers. The positive wage effect in the formal sector suggests complementarity between migrant and non-migrant workers. The adverse employment effect in the informal sector is possibly due to a preference for migrant workers over non-migrant workers. The estimated results are consistent with alternate specifications.