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The Composition of Wage Differentials between Migrants and Natives

  • Panagiotis Nanos
  • Christian Schluter

We consider the role of unobservables, such as differences in search frictions, reservation wages, and productivities for the explanation of wage differentials between migrants and natives. We disentangle these by estimating an empirical general equilibrium search model with on-the-job search due to Bontemps, Robin, and van den Berg (1999) on segments of the labour market defined by occupation, age, and nationality using a large scale German administrative dataset. The native-migrant wage differential is then decomposed into several parts, and we focus especially on the component that we label "migrant effect", being the difference in wage offers between natives and migrants in the same occupation-age segment in firms of the same productivity. Counterfactual decompositions of wage differentials allow us to identify and quantify their drivers, thus explaining within a common framework what is often labelled the unexplained wage gap.

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File URL: http://arxiv.org/pdf/1306.1781
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Paper provided by arXiv.org in its series Papers with number 1306.1781.

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Date of creation: Jun 2013
Date of revision: Oct 2013
Handle: RePEc:arx:papers:1306.1781
Contact details of provider: Web page: http://arxiv.org/

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  1. Albrecht, James & Axell, Bo, 1983. "An Equilibrium Model of Search Unemployment," Working Papers 83-10, C.V. Starr Center for Applied Economics, New York University.
  2. Herbert Brücker & Elke J. Jahn, 2009. "Migration and Wage-Setting: Reassessing the Labor Market Effects of Migration," Kiel Working Papers 1502, Kiel Institute for the World Economy.
  3. Flabbi, Luca, 2005. "Gender Discrimination Estimation in a Search Model with Matching and Bargaining," IZA Discussion Papers 1764, Institute for the Study of Labor (IZA).
  4. Fitzenberger, Bernd & Osikominu, Aderonke & Völter, Robert, 2005. "Imputation rules to improve the education variable in the IAB employment subsample," FDZ Methodenreport 200503_en, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
  5. Glitz, Albrecht, 2012. "Ethnic Segregation in Germany," IZA Discussion Papers 6841, Institute for the Study of Labor (IZA).
  6. Ana Damas de Matos, 2012. "The careers of immigrants," LSE Research Online Documents on Economics 51515, London School of Economics and Political Science, LSE Library.
  7. Boris Hirsch & Thorsten Schank & Claus Schnabel, 2008. "Differences in Labor Supply to Monopsonistic Firms and the Gender Pay Gap: An Empirical Analysis Using Linked Employer-Employee Data from Germany," Working Papers 1111, Princeton University, Department of Economics, Industrial Relations Section..
  8. Sebastian Gundel & Heiko Peters, 2008. "What Determines the Duration of Stay of Immigrants in Germany?: Evidence from a Longitudinal Duration Analysis," SOEPpapers on Multidisciplinary Panel Data Research 79, DIW Berlin, The German Socio-Economic Panel (SOEP).
  9. Bergemann, Annette & Caliendo, Marco & van den Berg, Gerard J. & Zimmermann, Klaus F., 2011. "The threat effect of participation in active labor market programs on job search behavior of migrants in Germany," Working Paper Series 2011:4, IFAU - Institute for Evaluation of Labour Market and Education Policy.
  10. Hirsch, Boris & Jahn, Elke J., 2012. "Is there monopsonistic discrimination against immigrants? First evidence from linked employer-employee data," Discussion Papers 79, Friedrich-Alexander-University Erlangen-Nuremberg, Chair of Labour and Regional Economics.
  11. Fitzenberger, Bernd & Wilke, Ralf A., 2004. "Unemployment Durations in West-Germany Before and After the Reform of the Unemployment Compensation System During the 1980s," ZEW Discussion Papers 04-24, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  12. Francesco D'Amuri & Gianmarco I. P. Ottaviano & Giovanni Peri, 2009. "The Labor Market Impact of Immigration in Western Germany in the 1990's," CReAM Discussion Paper Series 0910, Centre for Research and Analysis of Migration (CReAM), Department of Economics, University College London.
  13. Audra J. Bowlus & Zvi Eckstein, 2002. "Discrimination and Skill Differences in an Equilibrium Search Model," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 43(4), pages 1309-1345, November.
  14. repec:dgr:uvatin:19980089 is not listed on IDEAS
  15. Christensen, Bent Jesper & Mortensen, Dale & Neumann, George R. & Werwatz, Axel, 2000. "On the job search and the wage distribution," SFB 373 Discussion Papers 2000,108, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
  16. Cristian Bartolucci, 2013. "Gender Wage Gaps Reconsidered: A Structural Approach Using Matched Employer-Employee Data," Journal of Human Resources, University of Wisconsin Press, vol. 48(4), pages 998-1034.
  17. Pierre Cahuc & Fabien Postel-Vinay & Jean-Marc Robin, 2006. "Wage bargaining with on-the-job search: theory and evidence," Working Papers 150201, Institut National de la Recherche Agronomique, France.
  18. Dustmann, Christian & Glitz, Albrecht & Vogel, Thorsten, 2009. "Employment, Wages, and the Economic Cycle: Differences between Immigrants and Natives," IZA Discussion Papers 4432, Institute for the Study of Labor (IZA).
  19. repec:dgr:uvatin:1998089 is not listed on IDEAS
  20. Velling, Johannes, 1995. "Wage discrimination and occupational segregation of foreign male workers in Germany," ZEW Discussion Papers 95-04, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  21. Barth, Erling & Dale-Olsen, Harald, 2009. "Monopsonistic discrimination, worker turnover, and the gender wage gap," Labour Economics, Elsevier, vol. 16(5), pages 589-597, October.
  22. repec:dgr:uvatin:2098089 is not listed on IDEAS
  23. Berg, G.J. & Ridder, G., 1993. "An empirical equilibrium search model of the labour market," Serie Research Memoranda 0039, VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics.
  24. Christian Dustmann & Nikolaos Theodoropoulos, 2010. "Ethnic minority immigrants and their children in Britain," Oxford Economic Papers, Oxford University Press, vol. 62(2), pages 209-233, April.
  25. Sá, Filipa, 2011. "Does employment protection help immigrants? Evidence from European labor markets," Labour Economics, Elsevier, vol. 18(5), pages 624-642, October.
  26. Cristian Bartolucci, 2009. "Gender Wage Gaps Reconsidered: A Structural Approach Using Matched Employer-Employee Data," Carlo Alberto Notebooks 116, Collegio Carlo Alberto, revised 2010.
  27. Burdett, Kenneth & Mortensen, Dale T, 1998. "Wage Differentials, Employer Size, and Unemployment," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(2), pages 257-73, May.
  28. Eckstein, Zvi & van den Berg, Gerard J, 2004. "Empirical Labour Search: A Survey," CEPR Discussion Papers 4199, C.E.P.R. Discussion Papers.
  29. Cristian Bartolucci, 2010. "Understanding the Native-Immigrant Wage Gap Using Matched Employer-Employee Data. Evidence from Germany," Carlo Alberto Notebooks 150, Collegio Carlo Alberto.
  30. Bontemps, Christian & Robin, Jean-Marc & Van den Berg, Gerard J, 1999. "An Empirical Equilibrium Job Search Model with Search on the Job and Heterogeneous Workers and Firms," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 40(4), pages 1039-74, November.
  31. Bowlus, A.J., 1995. "A Search Interpretation of Male-Female Wage Differentials," UWO Department of Economics Working Papers 9504, University of Western Ontario, Department of Economics.
  32. Abdurrahman Aydemir & Mikal Skuterud, 2008. "The Immigrant Wage Differential within and across Establishments," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 61(3), pages 334-352, April.
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