Recovering the counterfactual wage distribution with selective return migration

• Migrants self-select in the decision to return to their home country.
• I recover the distribution of wages that would occur if all migration was permanent.
• I use an estimator that also accounts for selection on unobservables.
• Focusing on Mexican migrants, returnees are middle- to high-wage earners.
• Owing to positive self-selection, the immigrant-native wage gap partially closes.

This paper recovers the distribution of wages for Mexican-born workers living in the U.S. if no return migration of Mexican-born workers occurred. Because migrants self-select in the decision to return, the overarching problem addressed by this study is the use of an estimator that also accounts for selection on unobservables. I find that Mexican returnees are middle- to high-wage earners at all levels of educational attainment. Taking into account self-selection in return migration, wages would be approximately 7.7% higher at the median and 4.5% higher at the mean. Owing to positive self-selection, the immigrant-native wage gap would, therefore, partially close if there was no return migration.