Cultural differences and immigrants’ wages

Integration of immigrants into their host society is at the core of the public debate in most OECD countries. Immigrant integration includes two distinct dimensions: cultural and economic integration. This paper investigates the interplay between these two processes and presents three main results. First, it documents that immigrants from more culturally distant countries earn lower wages when they enter the German labor market. Second, it highlights that these wage differences progressively diminish over years spent in Germany and even disappear in some cases. For instance, the wage gap associated with a one standard deviation difference in religious and genetic distance disappears after 15 to 20 years. Finally, the paper provides evidence that immigrants who experience a greater increase in cultural assimilation experience more wage growth as well. Taken together, these results suggest that the cultural assimilation process can benefit the economic integration of immigrants.