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Reservation Wages of First and Second Generation Migrants

  • Amelie Constant
  • Annabelle Krause
  • Ulf Rinne
  • Klaus F. Zimmermann

This paper analyzes the reservation wages of first and second generation migrants. Based on recently collected and rich survey data of a representative inflow sample into unemployment in Germany, we empirically test the hypothesis that reservation wages increase from first to second generation migrants. Two extensions of the basic job search model, namely an unknown wage offer distribution and different reference standards, provide theoretical justifications for this conjecture. In both extensions, changing frames of reference are identified as a channel through which the phenomenon of increasing reservation wages may arise. In as far as language skills or self-evaluated returns to characteristics reflect a person's frames of reference, we find empirical support for this mechanism to be present.

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Paper provided by DIW Berlin, German Institute for Economic Research in its series Discussion Papers of DIW Berlin with number 1089.

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Length: 33 p.
Date of creation: 2010
Date of revision:
Handle: RePEc:diw:diwwpp:dp1089
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  1. Gang, Ira & Zimmermann, Klaus F, 1996. "Is Child Like Parent? Educational Attainment and Ethnic Origin," CEPR Discussion Papers 1461, C.E.P.R. Discussion Papers.
  2. Uhlendorff, Arne & Zimmermann, Klaus F, 2006. "Unemployment Dynamics among Migrants and Natives," CEPR Discussion Papers 5872, C.E.P.R. Discussion Papers.
  3. Caliendo, Marco & Falk, Armin & Kaiser, Lutz C. & Schneider, Hilmar & Uhlendorff, Arne & van den Berg, Gerard J. & Zimmermann, Klaus F., 2010. "The IZA Evaluation Dataset: Towards Evidence-Based Labor Policy-Making," IZA Discussion Papers 5400, Institute for the Study of Labor (IZA).
  4. Constant, Amelie F. & Gataullina, Liliya & Zimmermann, Klaus F., 2009. "Ethnosizing immigrants," Journal of Economic Behavior & Organization, Elsevier, vol. 69(3), pages 274-287, March.
  5. David Card & John DiNardo & Eugena Estes, 2000. "The More Things Change: Immigrants and the Children of Immigrants in the 1940s, the 1970s, and the 1990s," NBER Chapters, in: Issues in the Economics of Immigration, pages 227-270 National Bureau of Economic Research, Inc.
  6. Constant, Amelie & Zimmermann, Klaus F, 2007. "Measuring Ethnic Identity and Its Impact on Economic Behaviour," CEPR Discussion Papers 6466, C.E.P.R. Discussion Papers.
  7. Olof Aslund & Anders Bohlmark & Oskar Nordstrom Skans, 2009. "Age at migration and social integration," CReAM Discussion Paper Series 0927, Centre for Research and Analysis of Migration (CReAM), Department of Economics, University College London.
  8. Constant, Amelie F. & Zimmermann, Klaus F., 2009. "Work and Money: Payoffs by Ethnic Identity and Gender," IZA Discussion Papers 4275, Institute for the Study of Labor (IZA).
  9. Yann Algan & Christian Dustmann & Albrecht Glitz & Alan Manning, 2009. "The economic situation of first- and second-generation immigrants in France, Germany and the United Kingdom," LSE Research Online Documents on Economics 28680, London School of Economics and Political Science, LSE Library.
  10. Ben Jann, 2008. "The Blinder–Oaxaca decomposition for linear regression models," Stata Journal, StataCorp LP, vol. 8(4), pages 453-479, December.
  11. Bonin, Holger & Dohmen, Thomas J. & Falk, Armin & Huffman, David & Sunde, Uwe, 2007. "Cross-sectional earnings risk and occupational sorting: The role of risk attitudes," Munich Reprints in Economics 20204, University of Munich, Department of Economics.
  12. Constant, Amelie F. & Gataullina, Liliya & Zimmermann, Klaus F., 2007. "Naturalization Proclivities, Ethnicity and Integration," IZA Discussion Papers 3260, Institute for the Study of Labor (IZA).
  13. Juan Dubra, 2004. "Optimism and Overconfidence in Search," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 7(1), pages 198-218, January.
  14. Ben Kriechel & Gerard Pfann, 2006. "Learning to update your reservation wage while looking for a new job," Portuguese Economic Journal, Springer, vol. 5(2), pages 135-148, August.
  15. S. Bikhchandani & S. Sharma, 1990. "Optimal Search with Learning," UCLA Economics Working Papers 580, UCLA Department of Economics.
  16. Chiswick, Barry R, 1977. "Sons of Immigrants: Are They at an Earnings Disadvantage?," American Economic Review, American Economic Association, vol. 67(1), pages 376-80, February.
  17. Chiswick, Barry R, 1978. "The Effect of Americanization on the Earnings of Foreign-born Men," Journal of Political Economy, University of Chicago Press, vol. 86(5), pages 897-921, October.
  18. Thomsen, Stephan L. & Gernandt, Johannes & Aldashev, Alisher, 2008. "The Immigrant Wage Gap in Germany," ZEW Discussion Papers 08-089, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  19. James J. Heckman & Jora Stixrud & Sergio Urzua, 2006. "The Effects of Cognitive and Noncognitive Abilities on Labor Market Outcomes and Social Behavior," NBER Working Papers 12006, National Bureau of Economic Research, Inc.
  20. Constant, Amelie F. & Zimmermann, Klaus F., 2005. "Legal Status at Entry, Economic Performance, and Self-employment Proclivity: A Bi-national Study of Immigrants," IZA Discussion Papers 1910, Institute for the Study of Labor (IZA).
  21. Amelie Constant & Klaus Zimmermann, 2011. "Circular and Repeat Migration: Counts of Exits and Years Away from the Host Country," Population Research and Policy Review, Springer, vol. 30(4), pages 495-515, August.
  22. Burdett, Kenneth & Vishwanath, Tara, 1988. "Declining Reservation Wages and Learning," Review of Economic Studies, Wiley Blackwell, vol. 55(4), pages 655-65, October.
  23. Wolfgang Franz, 1980. "The Reservation Wage of Unemployed Persons in the Federal Republic of Germany: Theory and Empirical Tests," NBER Working Papers 0578, National Bureau of Economic Research, Inc.
  24. Rothschild, Michael, 1974. "Searching for the Lowest Price When the Distribution of Prices Is Unknown," Journal of Political Economy, University of Chicago Press, vol. 82(4), pages 689-711, July/Aug..
  25. Armin Falk & Markus Knell, . "Choosing the Joneses On the Endogeneity of Reference Groups," IEW - Working Papers 053, Institute for Empirical Research in Economics - University of Zurich.
  26. Stark, Oded & Taylor, J Edward, 1991. "Migration Incentives, Migration Types: The Role of Relative Deprivation," Economic Journal, Royal Economic Society, vol. 101(408), pages 1163-78, September.
  27. Eichhorst, Werner & Kuhn, Andrea & Thode, Eric & Zenker, Rosemarie, 2010. "Report No. 23: Traditionelle Beschäftigungsverhältnisse im Wandel," IZA Research Reports 23, Institute for the Study of Labor (IZA).
  28. George J. Borjas, 1991. "Ethnic Capital and Intergenerational Mobility," NBER Working Papers 3788, National Bureau of Economic Research, Inc.
  29. Riphahn, Regina T., 2001. "Cohort Effects in the Educational Attainment of Second Generation Immigrants in Germany: An Analysis of Census Data," IZA Discussion Papers 291, Institute for the Study of Labor (IZA).
  30. Kohn, Meir G. & Shavell, Steven, 1974. "The theory of search," Journal of Economic Theory, Elsevier, vol. 9(2), pages 93-123, October.
  31. Lancaster, Tony & Chesher, Andrew, 1983. "An Econometric Analysis of Reservation Wages," Econometrica, Econometric Society, vol. 51(6), pages 1661-76, November.
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