IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

How Different are Wages from Wage Potentials? - Analyzing the earnings disadvantage of immigrants in Germany

Immigrants in Germany display a poor earnings performance relative to natives. Arguing that human capital endowments identify earnings potentials rather than actual earnings, this paper estimates a stochastic earnings frontier and searches for systematic differences between natives and migrants in terms of distance to the frontier. GSOEP-Data of the year 2000 is used for estimation. The empirical results clearly support the frontier assumption, but – surprisingly – find natives and immigrants at about the same distance to the frontier. Assuming a half-normal distribution of the wage-inefficiency term, both groups trans­formed on average a modest 81% share of their potential income into market earnings. Due to the similar positions of natives and immigrants relative to the frontier, the wage discrimination hypothesis is rejected. Actually, human capital differentials are clearly the most important source for wage inequality. The earnings frontiers of immigrants from Eastern Europe as well as from Turkey are steeper than the respective frontier of natives, which supports the assimilation hypothesis. No assimilation is found for migrants from the European Union and from the former Yugoslavia.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.wiwi.uni-augsburg.de/vwl/institut/paper/256.pdf
Download Restriction: no

Paper provided by Universitaet Augsburg, Institute for Economics in its series Discussion Paper Series with number 256.

as
in new window

Length: pages
Date of creation: Jan 2004
Date of revision:
Handle: RePEc:aug:augsbe:0256
Contact details of provider: Postal: Universitaetsstrasse 16, D-86159 Augsburg, Germany
Phone: +49 821 598 4060
Fax: +49 821 598 4217
Web page: http://www.wiwi.uni-augsburg.de/vwl/institut
Email:


More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Hofler, Richard A. & Polachek, Solomon W., 1985. "A new approach for measuring wage ignorance in the labor market," Journal of Economics and Business, Elsevier, vol. 37(3), pages 267-276, August.
  2. Bauer, Thomas & Zimmermann, Klaus F, 1996. "Unemployment and Wages of Ethnic Germans," CEPR Discussion Papers 1512, C.E.P.R. Discussion Papers.
  3. Jondrow, James & Knox Lovell, C. A. & Materov, Ivan S. & Schmidt, Peter, 1982. "On the estimation of technical inefficiency in the stochastic frontier production function model," Journal of Econometrics, Elsevier, vol. 19(2-3), pages 233-238, August.
  4. Schmidt, Christoph M., 1997. "Immigrant performance in Germany: Labor earnings of ethnic German migrants and foreign guest-workers," The Quarterly Review of Economics and Finance, Elsevier, vol. 37(Supplemen), pages 379-397.
  5. Battese, G E & Coelli, T J, 1995. "A Model for Technical Inefficiency Effects in a Stochastic Frontier Production Function for Panel Data," Empirical Economics, Springer, vol. 20(2), pages 325-32.
  6. George J. Borjas, 1994. "The Economics of Immigration," Journal of Economic Literature, American Economic Association, vol. 32(4), pages 1667-1717, December.
  7. Ronald Oaxaca, 1971. "Male-Female Wage Differentials in Urban Labor Markets," Working Papers 396, Princeton University, Department of Economics, Industrial Relations Section..
  8. Polachek, Solomon W & Yoon, Bong Joon, 1996. "Panel Estimates of a Two-Tiered Earnings Frontier," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 11(2), pages 169-78, March-Apr.
  9. Borjas, George J, 1985. "Assimilation, Changes in Cohort Quality, and the Earnings of Immigrants," Journal of Labor Economics, University of Chicago Press, vol. 3(4), pages 463-89, October.
  10. Daneshvary, Nasser, et al, 1992. "Job Search and Immigrant Assimilation: An Earnings Frontier Approach," The Review of Economics and Statistics, MIT Press, vol. 74(3), pages 482-92, August.
  11. Fried, Harold O. & Lovell, C. A. Knox & Schmidt, Shelton S. (ed.), 1993. "The Measurement of Productive Efficiency: Techniques and Applications," OUP Catalogue, Oxford University Press, number 9780195072181, March.
  12. Pischke, Jörn-Steffen, 1992. "Assimilation and the earnings of guestworkers in Germany," ZEW Discussion Papers 92-17, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  13. Polachek, Solomon W. & Robst, John, 1998. "Employee labor market information: comparing direct world of work measures of workers' knowledge to stochastic frontier estimates," Labour Economics, Elsevier, vol. 5(2), pages 231-242, June.
  14. Aigner, Dennis & Lovell, C. A. Knox & Schmidt, Peter, 1977. "Formulation and estimation of stochastic frontier production function models," Journal of Econometrics, Elsevier, vol. 6(1), pages 21-37, July.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:aug:augsbe:0256. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dr. Albrecht Bossert)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.