Task specialization and the Native‐Foreign Wage Gap

This study documents that worker‐level variation in tasks has played a key role in the widening of the German Native‐Foreign Wage Gap. I find idiosyncratic differences account for up to 34 per cent of the wage gap. Importantly, natives specialize in high‐paying interactive activities not only between, but also within occupations. In contrast, foreign workers specialize in low‐paying manual activities. This enhanced degree of task specialization accounts for 11 per cent of the gap among high‐wage earners and 25 per cent among low‐wage earner, thus offering new insight into sources for imperfect substitution of native and foreign workers and consequently small migration‐induced wage effects.