Self-selection in migration and returns to unobservables

We build a model of migration that considers both observable and unobservable individual characteristics and their returns across locations. We focus on the interprovincial migration patterns of Canadian physicians, in part, because physicians are paid on a fee-for-service basis. Because fees are exogenous, we can estimate a mixed conditional-logit model to determine the effects of individual- and destination-specific characteristics (particularly earnings differentials) on physician location decisions. We find, among other things, that individuals with greater earnings potential based on unobservables are more likely to migrate to provinces where the returns to such unobservables are greater.