Paper number 1214 The Composition of Wage Differentials between Migrants and Natives.
Authors: Panagiotis Nanos (University of Southampton) and Chrisitan Schluter (Aix-Marseille University and University of Southampton)
We consider the role of unobservables, such as differences in search of frictions, reservation wages and productivities for the explanation of wage differentials between migrants and natives. We disentangle these by estimating an empirical general equilibrium search model with on-the-job search due to Bontemps, Robin, and van den Berg (1999) on segments of the labour market defined by occupation, age and nationality using a large scale German administrative dataset.
The native-migrant wage differential is then decomposed into several parts, and we focus especially on the component that we label ‘'migrant effect'', being the difference in wage offers between natives and migrants in the same occupation-age segment in firms of the same productivity. This decomposition of wage differentials also allows us to qualify the marginal and joint roles of the distinct unobservables by counterfactually assigning to one group structural parameter values of the reference group. The ‘'migrant effects'' are particularly pronounced among the unskilled and young, but the differences diminish with age.