TY - JOUR

T1 - Is there monopsonistic discrimination against immigrants?

AU - Hirsch, Boris

AU - Jahn, Elke J.

PY - 2015/5

Y1 - 2015/5

N2 - The authors investigate immigrants’ and natives’ labor supply to the firm within an estimation approach based on a dynamic monopsony framework. Applying duration models that account for unobserved worker heterogeneity to a large administrative employer–employee data set for Germany, they find that immigrants supply labor less elastically to firms than do natives. Under monopsonistic wage setting, the estimated elasticity differential predicts a 7.7 log points wage penalty for immigrants thereby accounting for the entire unexplained native–immigrant wage differential of 5.8 to 8.2 log points. When further distinguishing immigrant groups differing in their time spent in the German labor market, their immigration cohort, and their age at entry, the authors find that the observed unexplained wage differential is larger for those groups that show a larger elasticity differential relative to natives. These findings not only suggest that search frictions are a likely cause of employers’ more pronounced monopsony power over their immigrant workers but also imply that employers profit from discriminating against immigrants.

AB - The authors investigate immigrants’ and natives’ labor supply to the firm within an estimation approach based on a dynamic monopsony framework. Applying duration models that account for unobserved worker heterogeneity to a large administrative employer–employee data set for Germany, they find that immigrants supply labor less elastically to firms than do natives. Under monopsonistic wage setting, the estimated elasticity differential predicts a 7.7 log points wage penalty for immigrants thereby accounting for the entire unexplained native–immigrant wage differential of 5.8 to 8.2 log points. When further distinguishing immigrant groups differing in their time spent in the German labor market, their immigration cohort, and their age at entry, the authors find that the observed unexplained wage differential is larger for those groups that show a larger elasticity differential relative to natives. These findings not only suggest that search frictions are a likely cause of employers’ more pronounced monopsony power over their immigrant workers but also imply that employers profit from discriminating against immigrants.

KW - Economics

KW - Discrimination

KW - Monopsony

KW - Native-immigrant wage differential

UR - http://www.scopus.com/inward/record.url?scp=84928170481&partnerID=8YFLogxK

U2 - 10.1177/0019793915572124

DO - 10.1177/0019793915572124

M3 - Journal articles

VL - 68

SP - 501

EP - 528

JO - Industrial and Labor Relations Review

JF - Industrial and Labor Relations Review

SN - 0019-7939

IS - 3

ER -