Scandinavian Working Papers in Economics

Working Paper Series,
Trade Union Institute for Economic Research

No 169: Immigrants' and Natives' Unemployment-risk: Productivity Differentials or Discrimination?

Mahmood Arai and Roger Vilhelmsson
Additional contact information
Mahmood Arai: FIEF and Department of Economics, Stockholm University, Postal: FIEF, Wallingatan 38, SE-111 24 Stockholm, Sweden
Roger Vilhelmsson: SOFI, Postal: Stockholm University, SE-106 91 Stockholm, Sweden

Abstract: Studying the unemployment risk during 1992 to 1995 for a sample of employees in 1991, we find that immigrants from the non-European countries run a risk of unemployment that is twice the corresponding risk for the native workers. There exist substantial unemployment-risk differentials taking into account employees’ demographic and human capital characteristics, the wage-rate in 1991 and systematic sorting of workers across establishments associated with varying unemployment risks. Exaggerating beyond all reasonable limits, the ability differentials (measured in school grades and IQ-tests) between immigrants and natives fails to explain the differences between immigrants and natives in unemployment risks. Our simulations indicate that the observed unemployment-risk differentials between native and non-European workers correspond to ability differentials that are at least as large as the whole range of IQ-scores. Our conclusion is that discriminatory behavior and stereotype beliefs must be involved. Furthermore, we report results indicating that the existing income-gap between immigrants and natives in Sweden is almost entirely due to unequal employment opportunities.

Keywords: Immigration; Unemployment; Discrimination

JEL-codes: J15; J61; J64; J71

27 pages, August 15, 2001

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