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The Composition of Wage Differentials between Migrants and Natives

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  • Panagiotis Nanos
  • Christian Schluter

Abstract

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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  • Panagiotis Nanos & Christian Schluter, 2013. "The Composition of Wage Differentials between Migrants and Natives," Papers 1306.1781, arXiv.org, revised Oct 2013.
    • Handle: RePEc:arx:papers:1306.1781
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    Cited by:

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    2. Busch, Christopher & Krueger, Dirk & Ludwig, Alexander & Popova, Irina & Iftikhar, Zainab, 2020. "Should Germany have built a new wall? Macroeconomic lessons from the 2015-18 refugee wave," Journal of Monetary Economics, Elsevier, vol. 113(C), pages 28-55.
    3. Christiane Gross & Thomas Gurr & Monika Jungbauer-Gans & Sebastian Lang, 2020. "Prejudices against the unemployed—empirical evidence from Germany," Journal for Labour Market Research, Springer;Institute for Employment Research/ Institut für Arbeitsmarkt- und Berufsforschung (IAB), vol. 54(1), pages 1-13, December.
    4. Charles Ka Yui Leung & Joe Cho Yiu Ng & Edward Chi Ho Tang, 2020. "Why is the Hong Kong housing market unaffordable? Some stylized facts and estimations," ISER Discussion Paper 1081, Institute of Social and Economic Research, Osaka University.
    5. Brunow, Stephan & Jost, Oskar, 2019. "Wages of migrant and native employees in Germany: new light on an old issue," IAB Discussion Paper 201910, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    6. Sara Signorelli, 2020. "Do Skilled Migrants Compete with Native Workers? Analysis of a Selective Immigration Policy," 2020 Papers psi891, Job Market Papers.
    7. Moreno-Galbis, Eva & Tritah, Ahmed, 2016. "The effects of immigration in frictional labor markets: Theory and empirical evidence from EU countries," European Economic Review, Elsevier, vol. 84(C), pages 76-98.
    8. Gürtzgen, Nicole & Blömer, Maximilian & Pohlan, Laura & Stichnoth, Holger & van den Berg, Gerard, 2016. "Estimating an Equilibrium Job Search Model for the German Labour Market," VfS Annual Conference 2016 (Augsburg): Demographic Change 145950, Verein für Socialpolitik / German Economic Association.
    9. Matteo Cacciatore & Giuseppe Fiori & Nora Traum, 2020. "Hours and Employment Over the Business Cycle: A Structural Analysis," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 35, pages 240-262, January.
    10. Maximilian Joseph Blömer & Nicole Guertzgen & Laura Pohlan & Holger Stichnoth & Gerard J. Van den Berg, 2018. "Unemployment Effects of the German Minimum Wage in an Equilibrium Job Search Model," CESifo Working Paper Series 7160, CESifo.
    11. Fays, Valentine & Mahy, Benoît & Rycx, Francois & Volral, Mélanie, 2019. "Wage Discrimination Based on the Country of Birth: Do Tenure and Product Market Competition Matter?," IZA Discussion Papers 12706, Institute of Labor Economics (IZA).
    12. Brunow, Stephan & Jost, Oskar, 2020. "On the foreign to native wage differential in Germany: Does the home country matter?," IAB Discussion Paper 202026, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].

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    More about this item

    JEL classification:

    • 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
    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs

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