Reservation Wages of First and Second Generation Migrants

Abstract

This paper analyzes the reservation wages of first and second generation migrants in Germany. Based on recently collected and rich survey data of a representative sample of entrants into unemployment, we empirically test and confirm the hypothesis that reservation wages increase from first to second generation migrants, other things equal. Two extensions of the basic model of job search provide theoretical justifications for this hypothesis. In both cases, changing frames of reference are identified as a channel through which the phenomenon of increasing reservation wages may arise.Our empirical results show an unconditional reservation wage gap of 4.3 percent between first and second generation migrants, which increases to about 5.1 percent once differences in characteristics are taken into account. Moreover, we present evidence that changing frames of reference explain at least part of this gap: if we additionally control for reference groups via the ethnosizer, the gap decreases to 3.7 percent and becomes statistically insignificant. A decomposition analysis furthermore suggests that a substantial part of the unconditional gap is driven by higher self-evaluated returns to characteristics of second generation migrants, especially with respect to education.

The Impact of Immigration on Native Wages and Employment

“…Also, naturalization may foster their feeling of integration and/or modify immigrant beliefs and perceptions. Hence, naturalized immigrants are likely to have reference standards which are very close to those of natives (Constant, Krause, Rinne, et Zimmermann, 2010) and might no longer be forced into a sort of "social hyper-correctness" (Sayad, 1999).…”

Do Immigrants Compete with Natives in the Greek Labour Market? Evidence from the Skill-Cell Approach before and during the Great Recession

“…Battisti, Felbermayr, Peri and Poutvaara, 2014) or due to lower reservation wage (see e.g. Constant, Krause, Rinne and Zimmermann, 2010). This stylized fact encourages firms to create more jobs since it lowers the expected wage they have to pay and mitigates the initial adverse effects of the supply shock (see e.g.…”

Crossing the Border for Higher Status? Occupational Mobility of East–West Commuters in the Central European Region

“…In the literature the analytical emphasis in the field of wage mobility lies on wage effects in the receiving country, mainly due to the lack of longitudinal transnational data. For example research in this field focuses on effects of geographical labor mobility on wages in the destination region (Alsos and Eldring 2008;Baas, Brücker, and Hauptmann 2010;Friberg, Tronstad, and Dølvik 2012;Lemos and Portes 2014), wage assimilation of foreign-born workers to natives (Constant and Massey 2005;Kim 2013), wage mobility of immigrants within the destination country (Caparrós Ruiz 2014), intergenerational wage mobility of second-generation migrants (Flake 2013), or reservation wages of migrants, meaning the lowest wage rate at which a worker would be willing to accept a particular type of job (Constant et al 2016). There is a substantial gap in the research literature on potential wage and status gains of geographical mobility itself in terms of the change of individual occupational activities from one region to another.…”