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Reinterpreting the performance of immigrant wages from panel data

Author

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  • Derek Hum
  • Wayne Simpson

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Abstract

Immigrants differ from the native born in terms of unobserved factors, such as motivation, and observed factors, including those related to the interruption of labour market activity and earning capacity, which may bias estimates of immigrant integration. Using panel data from the Survey of Labour and Income Dynamics, we show that using potential experience, rather than actual experience, exaggerates estimates of the disruption and recovery caused by immigration. More importantly, we find support for omitted variables bias, arising from unobserved fixed effects. Instrumental variable estimates for both pooled and separate samples of immigrant and native born men demonstrate a wage disadvantage for immigrants upon entry that persists through their lifetime. Standard estimates of a modest wage advantage for the children of immigrants also suffer from omitted variables bias arising from unobservables. Contrary to most of the literature to date, our instrumental variable estimates which allow for unobservable fixed effects suggest that immigrants never catch up to otherwise comparable native born workers, but their children do just as well. Copyright Springer-Verlag 2004

Suggested Citation

  • Derek Hum & Wayne Simpson, 2004. "Reinterpreting the performance of immigrant wages from panel data," Empirical Economics, Springer, vol. 29(1), pages 129-147, January.
  • Handle: RePEc:spr:empeco:v:29:y:2004:i:1:p:129-147
    DOI: 10.1007/s00181-003-0193-1
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    Citations

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    Cited by:

    1. Garnett Picot & Patrizio Piraino, 2013. "Immigrant earnings growth: selection bias or real progress?," Canadian Journal of Economics, Canadian Economics Association, vol. 46(4), pages 1510-1536, November.
    2. Michael Beenstock & Barry Chiswick & Ari Paltiel, 2010. "Testing the immigrant assimilation hypothesis with longitudinal data," Review of Economics of the Household, Springer, vol. 8(1), pages 7-27, March.
    3. Maude BOULET & Brahim BOUDARBAT, 2015. "The Economic Performance of Immigrants with Canadian Education," Regional and Sectoral Economic Studies, Euro-American Association of Economic Development, vol. 15(2), pages 23-40.
    4. Mikal Skuterud & Mingcui Su, 2012. "The influence of measurement error and unobserved heterogeneity in estimating immigrant returns to foreign and host-country sources of human capital," Empirical Economics, Springer, vol. 43(3), pages 1109-1141, December.
    5. Sweetman, Arthur & Warman, Casey, 2009. "Temporary Foreign Workers and Former International Students as a Source of Permanent Immigration," CLSSRN working papers clsrn_admin-2009-34, Vancouver School of Economics, revised 22 Jun 2009.
    6. Alcobendas, Miguel Angel & Rodríguez-Planas, Núria, 2009. "Immigrants' Assimilation Process in a Segmented Labor Market," IZA Discussion Papers 4394, Institute for the Study of Labor (IZA).
    7. Hamid Beladi & Saibal Kar, 2015. "Skilled and Unskilled Immigrants and Entrepreneurship in a Developed Country," Review of Development Economics, Wiley Blackwell, vol. 19(3), pages 666-682, August.
    8. Nguyen, Ha Trong & Duncan, Alan S, 2017. "Exchange rate fluctuations and immigrants' labour market outcomes: New evidence from Australian household panel data," Journal of International Economics, Elsevier, vol. 105(C), pages 174-186.
    9. Cristina Fernández & Carolina Ortega, 2008. "Labor market assimilation of immigrants in Spain: employment at the expense of bad job-matches?," Spanish Economic Review, Springer;Spanish Economic Association, vol. 10(2), pages 83-107, June.
    10. Juan J. Dolado & Pablo Vázquez & Varios Autores, 2008. "Ensayos sobre los efectos económicos de la inmigración en España," Economic Reports 01-08, FEDEA.
    11. Mosfequs Salehin & Robert Breunig, 2012. "The immigrant wage gap and assimilation in Australia: the impact of unobserved heterogeneity," CEPR Discussion Papers 661, Centre for Economic Policy Research, Research School of Economics, Australian National University.
    12. Robert Breunig & Syed Hasan & Mosfequs Salehin, 2013. "The Immigrant Wage Gap and Assimilation in Australia: Does Unobserved Heterogeneity Matter?," The Economic Record, The Economic Society of Australia, vol. 89(287), pages 490-507, December.
    13. Abdurrahman Aydemir & Wen-Hao Chen & Miles Corak, 2009. "Intergenerational Earnings Mobility among the Children of Canadian Immigrants," The Review of Economics and Statistics, MIT Press, vol. 91(2), pages 377-397, May.
    14. Beenstock, Michael & Chiswick, Barry R. & Paltiel, Ari, 2005. "Endogenous Assimilation and Immigrant Adjustment in Longitudinal Data," IZA Discussion Papers 1840, Institute for the Study of Labor (IZA).
    15. Casey Warman, 2007. "You Can Take it with You! The Returns to Foreign Human Capital of Male Temporary Foreign Workers," Working Papers 1125, Queen's University, Department of Economics.
    16. Skuterud, Mikal & Su, Mingcui, 2009. "Immigrant Wage Assimilation and the Return to Foreign and Host-Country Sources of Human Capital," CLSSRN working papers clsrn_admin-2009-38, Vancouver School of Economics, revised 26 Jun 2009.
    17. Goldmann, Gustave & Sweetman, Arthur & Warman, Casey, 2009. "The Economic Return on New Immigrants' Human Capital: the Impact of Occupational Matching," CLSSRN working papers clsrn_admin-2009-30, Vancouver School of Economics, revised 22 Apr 2009.
    18. Sherrilyn Billger & Carlos Lamarche, 2015. "A panel data quantile regression analysis of the immigrant earnings distribution in the United Kingdom and United States," Empirical Economics, Springer, vol. 49(2), pages 705-750, September.
    19. Anna Christina D'Addio, 2007. "Intergenerational Transmission of Disadvantage: Mobility or Immobility Across Generations?," OECD Social, Employment and Migration Working Papers 52, OECD Publishing.
    20. de Walque, Damien, 2008. "Race, immigration, and the U.S. labor marke t: contrasting the outcomes of foreign born and native blacks," Policy Research Working Paper Series 4737, The World Bank.
    21. Mari Kangasniemi & Merja Kauhanen, 2013. "Who leaves and who stays? Outmigration of Estonian immigrants from Finland and its impact on economic assimilation of Estonian immigrants in Finland," Norface Discussion Paper Series 2013001, Norface Research Programme on Migration, Department of Economics, University College London.

    More about this item

    Keywords

    Immigration; wages; panel data; J40; C23; F22;

    JEL classification:

    • J40 - Labor and Demographic Economics - - Particular Labor Markets - - - General
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration

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