Age at Migration, Language Proficiency and Socio-economic Outcomes: Evidence from Australia

This paper seeks to estimate the causal effects of language proficiency on the earnings and social assimilation of Australian immigrants. Identifying the effects of languages on socio-economic outcomes is inherently difficult, due to the endogeneity of the language skills. This study exploits the phenomenon that younger children learn languages more easily than older children to construct an instrumental variable for language proficiency. To achieve this, we exploit the age at arrival of immigrants who came as children from Anglophone and non-Anglophone countries. We find English proficiency to have a significant positive effect on wages and promotions among adults who immigrated to Australia as children. English proficiency decreases the perceived risk of job loss, but leads to lower levels of health and life satisfaction. People with better English skills take more risks and drink more, and English proficiency increases the age at marriage. Partners of immigrants with better English skills drink more in general. Parents' proficiency in speaking English has a significant, positive effect on their children's English-speaking proficiency, high school achievements and occupational prestige. We show that IV estimates cannot be explained by alternative theories such as reverse causality and immigrants from English-speaking countries being a poor control group for non-language age-at-arrival effects.