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American Economic Review: Vol. 103 No. 3 (May 2013)

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Why Do Programmers Earn More in Houston Than Hyderabad? Evidence from Randomized Processing of US Visas

Article Citation

Clemens, Michael A. 2013. "Why Do Programmers Earn More in Houston Than Hyderabad? Evidence from Randomized Processing of US Visas." American Economic Review, 103(3): 198-202.

DOI: 10.1257/aer.103.3.198

Abstract

Why do workers earn so much more in the United States than in India? This study compares the earnings of workers in the two countries in a unique setting. The product is perfectly tradable (software), technology differences are nil (they are members of the same work team), and the workers are identical in expectation (those who enter the United States are chosen by natural randomization). The results suggest that output tradability, technology, and human capital together explain much less than half of the earnings gap. Location itself may have large effects on individual workers' wages and productivity, for reasons poorly understood.

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Authors

Clemens, Michael A. (Center for Global Development, Washington, DC)

JEL Classifications

J24: Human Capital; Skills; Occupational Choice; Labor Productivity
J31: Wage Level and Structure; Wage Differentials
J61: Geographic Labor Mobility; Immigrant Workers
L86: Information and Internet Services; Computer Software
O14: Industrialization; Manufacturing and Service Industries; Choice of Technology
O15: Economic Development: Human Resources; Human Development; Income Distribution; Migration


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