Immigrant-Native Differences in Earnings Mobility Processes: Evidence from Canadian and Danish Data

Abstract

This study compares the earnings mobility between immigrants and natives within and between Denmark and Canada. Both countries have different labour market conditions and immigration history which leads to an interesting comparison of earning mobility processes. The paper employs a dynamic multinomial logit model with discrete factor approximation for the specification of unobserved individual heterogeneity. The model takes into account the effect of the endogenous initial conditions problem and unobserved heterogeneity to separate structural and spurious state dependence. The results show that immigrants-native differences in earnings mobility, structural state dependence, and segmentation of earnings distribution are relatively more prominent in Denmark compared to Canada.

Keywords: Earnings Mobility Process, Immigrants and Natives, Spurious and Structural State Dependence, Quartile Mobility Rates, Discrete Factor Approximation

JEL Classification: C33, C35, J15, J38, J61