Scandinavian Working Papers in Economics

Working Paper Series,
Research Institute of Industrial Economics

No 1036: Explaining Cross-Country Differences in Labor Market Gaps between Immigrants and Natives in the OECD

Andreas Bergh ()
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Andreas Bergh: Research Institute of Industrial Economics (IFN), Postal: P.O. Box 55665, SE-102 15 Stockholm, Sweden

Abstract: In most OECD-countries, immigrants have lower employment and higher unemployment than natives. This paper compares nine potential explanations of these gaps. Results are obtained for 21–28 countries using bivariate correlations, OLS-regressions and Bayesian model averaging over all 512 theoretically possible model specifications. Two robust patterns are found. The unemployment gap is bigger in countries where collective bargaining agreements cover a larger share of the labor market. The employment gap is bigger in countries with more generous social safety nets. Five variables have explanatory value in some specifications: Xenophobia, employment protection laws, social expenditure, asylum applications, and the share of immigrants in the population. The education of immigrants and migrant integration policies have no explanatory value. A trade-off seems to exist such that countries with smaller labor market gaps have higher income inequality.

Keywords: Labor market segregation; Immigration; Insider-outside hypothesis

JEL-codes: E24; J51; J60; J71

29 pages, August 12, 2014

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