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Native-Immigrant Wage Differentials in Germany - Assimilation, Discrimination, or Human Capital?

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This study uses the concept of stochastic frontiers for analyzing the income disparity between ethnic groups in West Germany. Estimation of a potential rather than an average earnings function increases the explanatory power of the human capital approach and allows for detecting discrimination as well as assimilation processes. The empirical results im-ply that the human capital gap explains more than 75% of the wage differential between natives and foreign nationalities in Germany. As for ethnic Germans migrants, their wage disparity can be explained by 50% with human capital differentials. Surprisingly, only small differences could be observed with regard to the question of earnings efficiency. On an average, inhabitants as well as immigrants transformed about 85% to 90% of their potential income into actual earnings. The sources for the individually diverging efficiency ratios are not well understood, with discrimination only found for ethnic Germans from Eastern Europe. Somewhat disappointing, the assimilation hypothesis was clearly rejected for all migrants with again the exception being ethnic Germans from Eastern Europe.

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Paper provided by Universitaet Augsburg, Institute for Economics in its series Discussion Paper Series with number 197.

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Length: pages
Date of creation: Aug 2000
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Handle: RePEc:aug:augsbe:0197

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Cited by:
  1. Chletsos, Michael & Roupakias, Stelios, 2012. "Native-immigrant wage differentials in Greece: discrimination and assimilation," MPRA Paper 39862, University Library of Munich, Germany.
  2. Björn Christensen, 2002. "Reservation Wages, Offered Wages, and Unemployment Duration � New Empirical Evidence," Kiel Working Papers 1095, Kiel Institute for the World Economy.
  3. Lubomira Anastassova & Teodora Paligorova, 2005. "Why Immigrants Manage to Grab More SocialBenefits? Empirical Cross - Country Analysis," CERGE-EI Working Papers wp263, The Center for Economic Research and Graduate Education - Economic Institute, Prague.
  4. DeVoretz, Don J., 2004. "Immigration Policy: Methods of Economic Assessment," IZA Discussion Papers 1217, Institute for the Study of Labor (IZA).
  5. Usamah Fayez Al-Farhan, 2010. "Changes in the Gender Wage Gap in Germany during a Period of Rising Wage Inequality 1999-2006: Was it Discrimination in the Returns to Human Capital?," SOEPpapers on Multidisciplinary Panel Data Research 293, DIW Berlin, The German Socio-Economic Panel (SOEP).

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