The immigrant-native wage gap in Germany

authored by: Alisher Aldashev, Johannes Gernandt, Stephan L. Thomsen
Abstract: Immigrant-native wage differentials are observed in many countries, so in Germany. However, the available empirical literature for Germany defined the groups in consideration, immigrants and natives, by citizenship. This limits the explanatory power of the estimates since citizenship distinguishes foreigners and German nationals, but assigns naturalised immigrants (including the large group of ethnic Germans) to the latter group. Providing a more adequate definition based on the concept of origin we analyse the immigrant-native wage gap. Based on data from the German Socio-Economic Panel Study, we decompose the wage gap between native Germans, foreigners, and naturalised immigrants, and consider further subgroups in the analysis. In the literature, time of residence has been proven to be a relevant determinant of immigrants' wages. For the natives, time of residence is perfectly collinear with age, and unequal sets of variables have to be considered. We therefore suggest an extension of the Oaxaca-Blinder decomposition technique. Our results show a substantial gap in earnings for all immigrants' groups compared to natives. Discarding immigrants who completed education abroad reduces much of the immigrants' wage gap. Hence, educational attainment in Germany is an important component of economic integration of immigrants, and degrees obtained abroad are valued less.
Organisation(s): Institute of Economic Policy
External Organisation(s): Kazakh-British Technical University (KBTU)
Machinery and Equipment Manufacturers Association (VDMA)
Centre for European Economic Research (ZEW)
Lower Saxony Institute of Economic Research (NIW)
Type: Article
Journal: Jahrbücher für Nationalökonomie und Statistik
Volume: 232
Pages: 490-517
No. of pages: 28
ISSN: 0021-4027
Publication date: 01.10.2012
Publication status: Published
Peer reviewed: Yes
ASJC Scopus subject areas: General Business,Management and Accounting, Social Sciences (miscellaneous), Economics and Econometrics
Sustainable Development Goals: SDG 10 - Reduced Inequalities
Electronic version(s): https://www.econstor.eu/bitstream/10419/27566/1/dp08089.pdf (Access: Open)
https://doi.org/10.1515/jbnst-2012-0502 (Access: Closed)