September 2001

IZA DP No. 365: Qualifications, Discrimination, or Assimilation? An Extended Framework for Analysing Immigrant Wage Gaps

published in: Empirical Economics, 2004, 29 (4), 855-885

In this paper, we analyze immigrant wage gaps and propose an extension of the traditional wage decomposition technique, which is a synthesis from two strains of literature on ethnic/immigrant wage differences, namely the ‘assimilation literature’ and the ‘discrimination literature’. We estimate separate wage equations for natives and a number of immigrant groups using panel data sample selection models. Based on the estimations, we find that the immigrant wage gap is caused by a lack of qualifications and incomplete assimilation, and that a large fraction of that gap would disappear if only immigrants could find employment and thus accumulate work experience.