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Human Capital Quality and the Immigrant Wage Gap

  • Serge Coulombe

    ()

    (Department of Economics, University of Ottawa, 120 University St., Ottawa,Ontario)

  • Gilles Grenier

    ()

    (Department of Economics, University of Ottawa, 120 University St., Ottawa,Ontario)

  • Serge Nadeau

    ()

    (Department of Economics, University of Ottawa, 120 University St., Ottawa,Ontario)

We propose a new methodology for analyzing determinants of the wage gap between immigrants and natives. A Mincerian regression framework is extended to include GDP per capita in an immigrant’s country of birth as a proxy for the quality of education and work experience acquired in that country. In this regard, a central finding is that Canadian immigrants’ returns to schooling and work experience significantly increase with the GDP per capita of their country of birth. The contribution of quality of schooling and work experience to the immigrant wage gap is also examined. It is shown that lower human capital quality completely negates the endowment advantage that immigrants have in the areas of schooling and work experience, so that this factor is key to understanding why they earn less than Canadian natives. Since data on GDP per capita are available for most countries in the world over long periods of time, the proposed methodology can be applied to analyze immigrant wage gaps for a large set of countries for which common statistics on natives and immigrants are available.

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File URL: http://www.socialsciences.uottawa.ca/sites/default/files/public/eco/1212e.pdf
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Paper provided by University of Ottawa, Department of Economics in its series Working Papers with number 1212E.

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Length: 33 pages
Date of creation: 2012
Date of revision:
Handle: RePEc:ott:wpaper:1212e
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  1. Nicholas Bloom & John Van Reenen, 2010. "Human Resource Management and Productivity," NBER Working Papers 16019, National Bureau of Economic Research, Inc.
  2. Eric A. Hanushek & Ludger Woessmann, 2008. "The Role of Cognitive Skills in Economic Development," Journal of Economic Literature, American Economic Association, vol. 46(3), pages 607-68, September.
  3. Bloom, D. & Grenier, G. & Gunderson, M., 1993. "The Changing Labour Market Position of Canadian Immigrants," Working Papers 9305e, University of Ottawa, Department of Economics.
  4. Cawley, John & Heckman, James & Vytlacil, Edward, 2001. "Three observations on wages and measured cognitive ability," Labour Economics, Elsevier, vol. 8(4), pages 419-442, September.
  5. Serge Coulombe & Gilles Grenier & Serge Nadeau, 2014. "Quality of Work Experience and Economic Development: Estimates Using Canadian Immigrant Data," Journal of Human Capital, University of Chicago Press, vol. 8(3), pages 199 - 234.
  6. Aydemir, Abdurrahman & Skuterud, Mikal, 2004. "Explaining the Deteriorating Entry Earnings of Canada's Immigrant Cohorts: 1966-2000," Analytical Studies Branch Research Paper Series 2004225e, Statistics Canada, Analytical Studies Branch.
  7. Serge Coulombe & Jean-Francois Tremblay, 2009. "Migration and Skills Disparities across the Canadian Provinces," Regional Studies, Taylor & Francis Journals, vol. 43(1), pages 5-18.
  8. Javier Gardeazabal & Aratza Ugidos, . "More on identification in detailed wage decompositions," Studies on the Spanish Economy 140, FEDEA.
  9. Morissette, Rene & Frenette, Marc, 2003. "Will They Ever Converge? Earnings of Immigrants and Canadian-born Workers over the Last Two Decades," Analytical Studies Branch Research Paper Series 2003215e, Statistics Canada, Analytical Studies Branch.
  10. Ather H. Akbari, 1996. "Provincial Income Disparities in Canada: Does the Quality of Education Matter?," Canadian Journal of Economics, Canadian Economics Association, vol. 29(s1), pages 337-39, April.
  11. Nicholas Bloom & Christos Genakos & Raffaella Sadun & John Van Reenen, 2012. "Management Practices Across Firms and Countries," NBER Working Papers 17850, National Bureau of Economic Research, Inc.
  12. Alan S. Blinder, 1973. "Wage Discrimination: Reduced Form and Structural Estimates," Journal of Human Resources, University of Wisconsin Press, vol. 8(4), pages 436-455.
  13. Sweetman, Arthur, 2004. "Immigrant Source Country Educational Quality and Canadian Labour Market Outcomes," Analytical Studies Branch Research Paper Series 2004234e, Statistics Canada, Analytical Studies Branch.
  14. Yun, Myeong-Su, 2003. "A Simple Solution to the Identification Problem in Detailed Wage Decompositions," IZA Discussion Papers 836, Institute for the Study of Labor (IZA).
  15. Joseph Schaafsma & Arthur Sweetman, 2001. "Immigrant earnings: age at immigration matters," Canadian Journal of Economics, Canadian Economics Association, vol. 34(4), pages 1066-1099, November.
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