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IFAU - Institute for Evaluation of Labour Market and Education Policy

Abstract: We study the role of firm productivity in explaining earnings disparities between immigrants and natives using population-wide matched employer-employee data from Sweden. We find substantial earnings returns to working in firms with higher persistent productivity, with greater gains for immigrants from non-Western countries. Moreover, the pass-through of within-firm productivity variation to earnings is stronger for immigrants in low-productive, immigrant-dense firms. But immigrant workers are underrepresented in high-productive firms and less likely to move up the productivity distribution. Thus, sorting into less productive firms decreases earnings in poor-performing immigrant groups that would gain the most from working in high-productive firms.

Keywords: Firm productivity; Immigrant-native earnings gaps; Wage inequality

JEL-codes: J15; J31; J62

Language: English

38 pages, December 8, 2021

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