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On the Wage Growth of Immigrants: Israel, 1990-2000

  • Eckstein, Zvi

    ()

    (Interdisciplinary Center (IDC) Herzliya)

  • Weiss, Yoram

    ()

    (Tel Aviv University)

This paper develops a descriptive methodology for the analysis of wage growth of immigrants, based on human capital theory. The sources of the wage growth are: (i) the rise of the return to imported human capital; (ii) the impact of accumulated experience in the host country; and, (iii) the mobility up the occupational ladder in the host country. Using human capital theory, we derive a non-linear model that imposes restrictions across the earning equations of natives and immigrants. The two earning functions are estimated jointly, using repeated cross section data. Using data on immigrants from the former Soviet Union to Israel, we find: Upon arrival, immigrants receive no return for imported skills. In the ten years following arrival, wages of highly skilled immigrants grow at 8% a year. Rising prices of skills, occupational transitions, accumulated experience in Israel and economy-wide rise in wages account for 3.4, 1.1, 1.5 and 1.4 percent each. In the long run, the return for schooling converges to .028, substantially below the .069 for natives. We do not reject the hypothesis that the return for experience converges to that of natives, and immigrants receive higher return for their unmeasured skills. We find that there is some downgrading in occupational distribution of immigrants relative to that of natives. Moreover, the average wages of immigrants approach but do not converge to the wages of comparable natives. The main reason for that is the low return to their imported skills.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 710.

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Length: 57 pages
Date of creation: Feb 2003
Date of revision:
Publication status: published in: Journal of the European Economic Association, 2004, 2 (4), 665-695
Handle: RePEc:iza:izadps:dp710
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  1. LaLonde, Robert J & Topel, Robert H, 1991. "Immigrants in the American Labor Market: Quality, Assimilation, and Distributional Effects," American Economic Review, American Economic Association, vol. 81(2), pages 297-302, May.
  2. Blinder, Alan S & Weiss, Yoram, 1976. "Human Capital and Labor Supply: A Synthesis," Journal of Political Economy, University of Chicago Press, vol. 84(3), pages 449-72, June.
  3. James Heckman & Lance Lochner & Christopher Taber, 1998. "Explaining Rising Wage Inequality: Explanations With A Dynamic General Equilibrium Model of Labor Earnings With Heterogeneous Agents," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 1(1), pages 1-58, January.
  4. Brezis, Elise S & Krugman, Paul R & Tsiddon, Daniel, 1993. "Leapfrogging in International Competition: A Theory of Cycles in National Technological Leadership," American Economic Review, American Economic Association, vol. 83(5), pages 1211-19, December.
  5. Sarit Cohen-Goldner & Zvi Eckstein, 2008. "Labor Mobility Of Immigrants: Training, Experience, Language, And Opportunities," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 49(3), pages 837-872, 08.
  6. Griliches, Zvi, 1977. "Estimating the Returns to Schooling: Some Econometric Problems," Econometrica, Econometric Society, vol. 45(1), pages 1-22, January.
  7. George J. Borjas, 2000. "The Economic Progress of Immigrants," NBER Chapters, in: Issues in the Economics of Immigration, pages 15-50 National Bureau of Economic Research, Inc.
  8. Henry S. Farber & Robert Gibbons, 1994. "Learning and Wage Dynamics," Working Papers 707, Princeton University, Department of Economics, Industrial Relations Section..
  9. Weiss, Y. & Sauer, R.M. & Gotlibovski, M., 1999. "Immigration, Search and Lost of Skill," Papers 26-99, Tel Aviv.
  10. 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.
  11. 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.
  12. Caballe, Jordi & Santos, Manuel S, 1993. "On Endogenous Growth with Physical and Human Capital," Journal of Political Economy, University of Chicago Press, vol. 101(6), pages 1042-67, December.
  13. George J. Borjas, 1994. "The Economics of Immigration," Journal of Economic Literature, American Economic Association, vol. 32(4), pages 1667-1717, December.
  14. Juhn, Chinhui & Murphy, Kevin M & Pierce, Brooks, 1993. "Wage Inequality and the Rise in Returns to Skill," Journal of Political Economy, University of Chicago Press, vol. 101(3), pages 410-42, June.
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