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Employer Policies and the Immigrant-Native Earnings Gap

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  • Dostie, Benoit

    (HEC Montreal)

  • Li, Jiang

    (Statistics Canada)

  • Card, David

    (University of California, Berkeley)

  • Parent, Daniel

    (HEC Montreal)

Abstract

We use longitudinal data from the income tax system to study the impacts of firms' employment and wage-setting policies on the level and change in immigrant-native wage differences in Canada. We focus on immigrants who arrived in the early 2000s, distinguishing between those with and without a college degree from two broad groups of countries – the U.S., the U.K. and Northern Europe, and the rest of the world. Consistent with a growing literature based on the two-way fixed effects model of Abowd, Kramarz, and Margolis (1999), we find that firm-specific wage premiums explain a significant share of earnings inequality in Canada and contribute to the average earnings gap between immigrants and natives. In the decade after receiving permanent status, earnings of immigrants rise relative to those of natives. Compositional effects due to selective outmigration and changing participation play no role in this gain. About one-sixth is attributable to movements up the job ladder to employers that offer higher pay premiums for all groups, with particularly large gains for immigrants from the "rest of the world" countries.

Suggested Citation

  • Dostie, Benoit & Li, Jiang & Card, David & Parent, Daniel, 2020. "Employer Policies and the Immigrant-Native Earnings Gap," IZA Discussion Papers 13245, Institute of Labor Economics (IZA).
  • Handle: RePEc:iza:izadps:dp13245
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    1. Employer Policies and the Immigrant-Native Earnings Gap
      by maximorossi in NEP-LTV blog on 2020-06-30 18:40:30

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    6. Andrej Cupák & Pavel Ciaian & d'Artis Kancs, 2021. "Comparing the immigrant-native pay gap: A novel evidence from home and host countries," EERI Research Paper Series EERI RP 2021/05, Economics and Econometrics Research Institute (EERI), Brussels.
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    10. Eduard Storm, 2022. "Task specialization and the Native‐Foreign Wage Gap," LABOUR, CEIS, vol. 36(2), pages 167-195, June.
    11. Li, Jiang & Dostie, Benoit & Simard-Duplain, Gaëlle, 2020. "What Is the Role of Firm-Specific Pay Policies on the Gender Earnings Gap in Canada?," IZA Discussion Papers 13907, Institute of Labor Economics (IZA).
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    More about this item

    Keywords

    wage differentials; immigrants; linked employer-employee data; firm effects;
    All these keywords.

    JEL classification:

    • J15 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Minorities, Races, Indigenous Peoples, and Immigrants; Non-labor Discrimination
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J71 - Labor and Demographic Economics - - Labor Discrimination - - - Hiring and Firing

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