Earnings disadvantage of immigrants: are we comparing apples to apples?

Abstract

The substantial increase in the proportion of immigrants in the US population has attracted considerable research interest in their labor market outcomes, in particular, their relative wages. Most studies in this area, however, do not account for the fact that immigrants have unobservable characteristics that are different from those of natives and that are related to their decision to migrate to a new country. These characteristics, if not controlled for, may result in inaccurate estimates of the earnings disadvantage associated with immigrant status. This study attempts to account for unobservable characteristics associated with migration by comparing immigrants with native migrants. The results suggest that previous studies that used all natives as a comparison group may have provided a lower bound of the wage disadvantage faced by immigrants.