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Real Exchange Rates and the Earnings of Immigrants

Author

Listed:
  • Christian Dustmann
  • Hyejin Ku
  • Tetyana Surovtseva

Abstract

We relate origin-destination real price differences to immigrants’ reservation wages and their career trajectories, exploiting administrative data from Germany and the 2004 enlargement of the European Union. We find that immigrants who enter Germany when a unit of earnings from Germany allows for larger consumption at home settle for lower entry wages, but subsequently catch up to those arriving with less favourable exchange rates, through transition to better-paying occupations and firms. Similar patterns hold in the United States data. Our analysis offers one explanation for the widespread phenomenon of immigrants’ downgrading, with new implications for immigrant cohort effects and assimilation profiles.

Suggested Citation

  • Christian Dustmann & Hyejin Ku & Tetyana Surovtseva, 2024. "Real Exchange Rates and the Earnings of Immigrants," The Economic Journal, Royal Economic Society, vol. 134(657), pages 271-294.
    • Handle: RePEc:oup:econjl:v:134:y:2024:i:657:p:271-294.
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    File URL: http://hdl.handle.net/10.1093/ej/uead066
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    Citations

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    Cited by:

    1. Julian Costas-Fernandez & Simon Lodato, 2023. "Distributional effects of immigration and imperfect labour markets," RFBerlin Discussion Paper Series 2301, ROCKWOOL Foundation Berlin (RFBerlin).
    2. Arellano-Bover, Jaime & San, Shmuel, 2023. "The Role of Firms and Job Mobility in the Assimilation of Immigrants: Former Soviet Union Jews in Israel 1990–2019," IZA Discussion Papers 16389, Institute of Labor Economics (IZA).
    3. Christoph Albert & Joan Llull & Albrecht Glitz, 2021. "Labor Market Competition and the Assimilation of Immigrants," Working Papers 1280, Barcelona School of Economics.
    4. Riphahn, Regina T. & Sauer, Irakli, 2024. "Earnings Assimilation of Post-reunification East German Migrants in West Germany," IZA Discussion Papers 17148, Institute of Labor Economics (IZA).
    5. Manning, Alan & Mazeine, Graham, 2024. "Should I stay or should I go? Return migration from the United States," LSE Research Online Documents on Economics 126831, London School of Economics and Political Science, LSE Library.
    6. Joseph-Simon Görlach & Katarina Kuske, 2022. "Temporary migration entails benefits, but also costs, for sending and receiving countries," IZA World of Labor, Institute of Labor Economics (IZA), pages 503-503, November.
    7. David Zuchowski, 2025. "Migration response to an immigration shock: evidence from Russia’s aggression against Ukraine," Journal of Economic Geography, Oxford University Press, vol. 25(1), pages 21-40.
    8. Dustmann Christian, 2024. "Migration ist kein Nullsummenspiel –ein Interview," Wirtschaftsdienst, Sciendo, vol. 104(8), pages 533-538.
    9. Hasan, Syed & Shakur, Shamim & Breunig, Robert, 2021. "Exchange rates and expenditure of households with foreign-born members: Evidence from Australia," Journal of Economic Behavior & Organization, Elsevier, vol. 188(C), pages 977-997.

    More about this item

    JEL classification:

    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
    • O24 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Trade Policy; Factor Movement; Foreign Exchange Policy

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