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Human Capital Quality and the Immigrant Wage Gap

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Author Info

  • Serge Coulombe

    ()
    (Department of Economics, University of Ottawa, 120 University St., Ottawa,Ontario)

  • Gilles Grenier

    ()
    (Department of Economics, University of Ottawa, 120 University St., Ottawa,Ontario)

  • Serge Nadeau

    ()
    (Department of Economics, University of Ottawa, 120 University St., Ottawa,Ontario)

Abstract

We propose a new methodology for analyzing determinants of the wage gap between immigrants and natives. A Mincerian regression framework is extended to include GDP per capita in an immigrant’s country of birth as a proxy for the quality of education and work experience acquired in that country. In this regard, a central finding is that Canadian immigrants’ returns to schooling and work experience significantly increase with the GDP per capita of their country of birth. The contribution of quality of schooling and work experience to the immigrant wage gap is also examined. It is shown that lower human capital quality completely negates the endowment advantage that immigrants have in the areas of schooling and work experience, so that this factor is key to understanding why they earn less than Canadian natives. Since data on GDP per capita are available for most countries in the world over long periods of time, the proposed methodology can be applied to analyze immigrant wage gaps for a large set of countries for which common statistics on natives and immigrants are available.

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Bibliographic Info

Paper provided by University of Ottawa, Department of Economics in its series Working Papers with number 1212E.

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Length: 33 pages
Date of creation: 2012
Date of revision:
Handle: RePEc:ott:wpaper:1212e

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Keywords: Wage differentials; immigrants vs. Canadian natives; human capital quality; immigration policies; work experience; education;

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References

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  1. Cawley, John & Heckman, James & Vytlacil, Edward, 2001. "Three observations on wages and measured cognitive ability," Labour Economics, Elsevier, vol. 8(4), pages 419-442, September.
  2. Serge Coulombe & Jean-Francois Tremblay, 2009. "Migration and Skills Disparities across the Canadian Provinces," Regional Studies, Taylor & Francis Journals, vol. 43(1), pages 5-18.
  3. Bloom, Nicholas & Van Reenen, John, 2010. "Human Resource Management and Productivity," CEPR Discussion Papers 7849, C.E.P.R. Discussion Papers.
  4. Sweetman, Arthur, 2004. "Immigrant Source Country Educational Quality and Canadian Labour Market Outcomes," Analytical Studies Branch Research Paper Series 2004234e, Statistics Canada, Analytical Studies Branch.
  5. Nicholas Bloom & Christos Genakos & Raffaella Sadun & John Van Reenen, 2012. "Management Practices Across Firms and Countries," NBER Working Papers 17850, National Bureau of Economic Research, Inc.
  6. David E. Bloom & Gilles Grenier & Morley Gunderson, 1994. "The Changing Labor Market Position of Canadian Immigrants," NBER Working Papers 4672, National Bureau of Economic Research, Inc.
  7. Ugidos Olazabal, Arantza & Gardeazabal, Javier, 2002. "More on Identification on Detailed Wage Decompositions," DFAEII Working Papers 2002-17, University of the Basque Country - Department of Foundations of Economic Analysis II.
  8. Eric A. Hanushek & Ludger Woessmann, 2008. "The Role of Cognitive Skills in Economic Development," Journal of Economic Literature, American Economic Association, vol. 46(3), pages 607-68, September.
  9. Abdurrahman Aydemir & Mikal Skuterud, 2005. "Explaining the deteriorating entry earnings of Canada's immigrant cohorts, 1966 - 2000," Canadian Journal of Economics, Canadian Economics Association, vol. 38(2), pages 641-672, May.
  10. Serge Coulombe & Gilles Grenier & Serge Nadeau, 2011. "Quality of Work Experience and Economic Development—Estimates using Canadian Immigrant Data," Working Papers 1109E, University of Ottawa, Department of Economics.
  11. Yun, Myeong-Su, 2003. "A Simple Solution to the Identification Problem in Detailed Wage Decompositions," IZA Discussion Papers 836, Institute for the Study of Labor (IZA).
  12. Ather H. Akbari, 1996. "Provincial Income Disparities in Canada: Does the Quality of Education Matter?," Canadian Journal of Economics, Canadian Economics Association, vol. 29(s1), pages 337-39, April.
  13. Joseph Schaafsma & Arthur Sweetman, 2001. "Immigrant earnings: age at immigration matters," Canadian Journal of Economics, Canadian Economics Association, vol. 34(4), pages 1066-1099, November.
  14. Alan S. Blinder, 1973. "Wage Discrimination: Reduced Form and Structural Estimates," Journal of Human Resources, University of Wisconsin Press, vol. 8(4), pages 436-455.
  15. Morissette, Rene & Frenette, Marc, 2003. "Will They Ever Converge? Earnings of Immigrants and Canadian-born Workers over the Last Two Decades," Analytical Studies Branch Research Paper Series 2003215e, Statistics Canada, Analytical Studies Branch.
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Cited by:
  1. Schiff, Maurice, 2014. "Brain Drain, Educational Quality and Immigration Policy: Impact on Productive Human Capital in Source and Host Countries, with Canada as a Case Study," IZA Discussion Papers 7955, Institute for the Study of Labor (IZA).

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