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The Immigrant-Native Wage Gap in Germany

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  • Alisher Aldashev

    ()
    (Kazakh-British Technical University, Almaty)

  • Johannes Gernandt

    ()
    (VDMA)

  • Stephan L. Thomsen

    ()
    (ZEW Mannheim)

Abstract

Immigrant-native wage differentials are observed in many countries, so in Germany. However, the available empirical literature for Germany defined the groups in consideration, immigrants and natives, by citizenship. This limits the explanatory power of the estimates since citizenship distinguishes foreigners and German nationals, but assigns naturalised immigrants (including the large group of ethnic Germans) to the latter group. Providing a more adequate definition based on the concept of origin we analyse the immigrant-native wage gap. Based on data from the German Socio-Economic Panel Study,we decompose the wage gap between native Germans, foreigners, and naturalised immigrants, and consider further subgroups in the analysis. In the literature, time of residence has been proven to be a relevant determinant of immigrants’ wages. For the natives, time of residence is perfectly collinear with age, and unequal sets of variables have to be considered.We therefore suggest an extension of the Oaxaca-Blinder decomposition technique. Our results show a substantial gap in earnings for all immigrants’ groups compared to natives. Discarding immigrants who completed education abroad reduces much of the immigrants’ wage gap. Hence, educational attainment in Germany is an important component of economic integration of immigrants, and degrees obtained abroad are valued less.

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Bibliographic Info

Article provided by Justus-Liebig University Giessen, Department of Statistics and Economics in its journal Journal of Economics and Statistics.

Volume (Year): 232 (2012)
Issue (Month): 5 (September)
Pages: 490-517

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Handle: RePEc:jns:jbstat:v:232:y:2012:i:5:p:490-517

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Keywords: Immigration; wage gap; decomposition; educational attainment; Germany; SOEP;

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References

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  1. Rachel M. Friedberg, 1996. "You Can't Take It With You? Immigrant Assimilation and the Portability of Human Capital," NBER Working Papers 5837, National Bureau of Economic Research, Inc.
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  15. Oaxaca, Ronald, 1973. "Male-Female Wage Differentials in Urban Labor Markets," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 14(3), pages 693-709, October.
  16. Joseph G. Altonji & Rebecca M. Blank, . "Race and Gender in the Labor Market," IPR working papers 98-18, Institute for Policy Resarch at Northwestern University.
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Cited by:
  1. Humpert, Stephan, 2013. "The immigrant-native pay gap in Germany," MPRA Paper 50413, University Library of Munich, Germany.
  2. Verena Dill, 2013. "Ethnic Concentration and Extreme Right-Wing Voting Behavior in West Germany," Research Papers in Economics 2013-02, University of Trier, Department of Economics.
  3. Verena Dill, 2013. "Ethnic Concentration and Extreme Right-Wing Voting Behavior in West Germany," SOEPpapers on Multidisciplinary Panel Data Research 565, DIW Berlin, The German Socio-Economic Panel (SOEP).

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