Reinterpreting the performance of immigrant wages from panel data

Abstract

Immigrants differ from the native born in terms of unobserved factors, such as motivation, and observed factors, including those related to the interruption of labour market activity and earning capacity, which may bias estimates of immigrant integration. Using panel data from the Survey of Labour and Income Dynamics, we show that using potential experience, rather than actual experience, exaggerates estimates of the disruption and recovery caused by immigration. More importantly, we find support for omitted variables bias, arising from unobserved fixed effects. Instrumental variable estimates for both pooled and separate samples of immigrant and native born men demonstrate a wage disadvantage for immigrants upon entry that persists through their lifetime. Standard estimates of a modest wage advantage for the children of immigrants also suffer from omitted variables bias arising from unobservables. Contrary to most of the literature to date, our instrumental variable estimates which allow for unobservable fixed effects suggest that immigrants never catch up to otherwise comparable native born workers, but their children do just as well. Copyright Springer-Verlag 2004Immigration, wages, panel data, J40, C23, F22,

Intergenerational Earnings Mobility among the Children of Canadian Immigrants

“…Heisz (1999) Corak (2001), Fortin andLefebvre (1998), andGrawe (2004a,b) present evidence for the general population, but the availability of appropriate data have prevented an analysis focused on immigrants, though Sweetman and Dicks (1999) offer an analysis by ethnicity. Hum and Simpson (2004) Census who were potentially their parents. An analysis of the generational mobility of immigrants using detailed country of origin along these lines is also offered in Borjas (1993) and Card, DiNardo and Estes (2000).…”

The Immigrant Wage Gap and Assimilation in Australia: Does Unobserved Heterogeneity Matter?

“…Cornwell and Rupert () confirm that AM and BMS estimators are more efficient than the HT estimator in their analysis of returns to schooling, but their results are disputed by Baltagi and Khanti‐Akom (). The AM and HT estimators have been found to produce similar estimates (e.g., Hum & Simpson, ). Implementing AM and BMS in unbalanced panels requires additional assumptions to deal with missing observations and individual spells which do not start at the same time period.…”

“…Several international studies have used panel data to control for unobserved individual heterogeneity. Hum and Simpson () estimate immigrant earnings and find that immigrant earnings assimilation in Canada is slower than previously thought. Fertig and Schurer () find a similar result using German panel data.…”

The legacy of immigration: labour market performance and education in the second generation

“…The estimator used here, for example, allows us to expand the set of control variables to include job characteristics to explain hours. We thank an anonymous referee for this suggestion to improve the current version of the article.17 The Wald test for independent selection (employment) and structural (wage, hours or earnings) equations also rejects the hypothesis of no sample selection bias at the 1% level of significance.18 Hum and Simpson (2004a) estimate virtually identical returns to an additional year of schooling in Canada of 3.5% for men and 6% for women using a fixed effects model and the first SLID panel. They also note that these estimates are consistent with other fixed effects estimates of the returns to education in the United States.19 Using mean hours and wages for the other native born samples of men and women inTable 1, the coefficient for imputed log wage estimates a gross wage elasticity for men of 0.21 and 0.40 for women and the coefficient on other income yields an income elasticity of 0.04 for men and 0.02 for women.Hum and Simpson (1991, pp.…”