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.