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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. 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).
  2. Aslund, Olof & Böhlmark, Anders & Nordström Skans, Oskar, 2009. "Age at Migration and Social Integration," IZA Discussion Papers 4263, Institute for the Study of Labor (IZA).
  3. Amelie Constant & Klaus F. Zimmermann, 2006. "Legal Status at Entry, Economic Performance, and Self-Employment Proclivity: A Bi-National Study of Immigrants," Discussion Papers of DIW Berlin 547, DIW Berlin, German Institute for Economic Research.
  4. David Card & John DiNardo & Eugena Estes, 1998. "The More Things Change: Immigrants and the Children of Immigrants in the 1940s, the 1970s, and the 1990s," NBER Working Papers 6519, National Bureau of Economic Research, Inc.
  5. Constant, Amelie F. & Zimmermann, Klaus F., 2007. "Measuring Ethnic Identity and Its Impact on Economic Behavior," IZA Discussion Papers 3063, Institute for the Study of Labor (IZA).
  6. Klaus F. Zimmermann & Amelie F. Constant & Liliya Gataullina, 2009. "Naturalization proclivities, ethnicity and integration," International Journal of Manpower, Emerald Group Publishing, vol. 30(1/2), pages 70-82, May.
  7. 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.
  8. Constant, Amelie F. & Gataullina, Liliya & Zimmermann, Klaus F., 2006. "Ethnosizing Immigrants," IZA Discussion Papers 2040, Institute for the Study of Labor (IZA).
  9. S. Bikhchandani & S. Sharma, 1990. "Optimal Search with Learning," UCLA Economics Working Papers 580, UCLA Department of Economics.
  10. Arne Uhlendorff & Klaus F. Zimmermann, 2014. "Unemployment Dynamics among Migrants and Natives," Economica, London School of Economics and Political Science, vol. 81(322), pages 348-367, 04.
  11. 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.
  12. 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.
  13. 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.
  14. 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," CEP Discussion Papers dp0951, Centre for Economic Performance, LSE.
  15. 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.
  16. 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.
  17. Kohn, Meir G. & Shavell, Steven, 1974. "The theory of search," Journal of Economic Theory, Elsevier, vol. 9(2), pages 93-123, October.
  18. Regina T. Riphahn, 2003. "Cohort effects in the educational attainment of second generation immigrants in Germany: An analysis of census data," Journal of Population Economics, Springer;European Society for Population Economics, vol. 16(4), pages 711-737, November.
  19. 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.
  20. 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).
  21. Ben Jann, 2008. "The Blinder–Oaxaca decomposition for linear regression models," Stata Journal, StataCorp LP, vol. 8(4), pages 453-479, December.
  22. Lancaster, Tony & Chesher, Andrew, 1983. "An Econometric Analysis of Reservation Wages," Econometrica, Econometric Society, vol. 51(6), pages 1661-76, November.
  23. Marco Caliendo & Armin Falk & Lutz C. Kaiser & Hilmar Schneider & Arne Uhlendorff & Gerard van den Berg & Klaus F. Zimmermann, 2011. "The IZA Evaluation Dataset: towards evidence-based labor policy making," International Journal of Manpower, Emerald Group Publishing, vol. 32(7), pages 731-752, November.
  24. Alisher Aldashev & Johannes Gernandt & Stephan L. Thomsen, 2008. "The Immigrant Wage Gap in Germany," FEMM Working Papers 08019, Otto-von-Guericke University Magdeburg, Faculty of Economics and Management.
  25. Kenneth Burdett & Tara Vishwanath, 1988. "Declining Reservation Wages and Learning," Review of Economic Studies, Oxford University Press, vol. 55(4), pages 655-665.
  26. George J. Borjas, 1992. "Ethnic Capital and Intergenerational Mobility," The Quarterly Journal of Economics, Oxford University Press, vol. 107(1), pages 123-150.
  27. 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.
  28. 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..
  29. Ben Kriechel & Gerard Pfann, 2006. "Learning to update your reservation wage while looking for a new job," Portuguese Economic Journal, Springer;Instituto Superior de Economia e Gestao, vol. 5(2), pages 135-148, August.
  30. 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.
  31. 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.
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