Immigrant Earnings Growth: Selection Bias or Real Progress?

Abstract

This paper studies the effect of selective attrition on estimates of immigrant earnings growth based on repeated cross-sectional data in Canada. Recent evidence from longitudinal data in the United States shows that the earnings gap between immigrants and the U.S.-born closes more slowly over time in the years following landing than previous cross-sectional estimates have suggested. This is because results based on repeated cross-sectional data contained a bias introduced by selective attrition of immigrants. This study uses longitudinal tax data linked to immigrant landing records in order to estimate the change in immigrant earnings and the immigrant-Canadian-born earnings gap. The results are compared with those from repeated cross-sectional data. When one focuses on the earnings growth of immigrants, earnings trajectories based on repeated cross-sections are found to be biased marginally upwards as a result of selective immigrant attrition. However, no evidence is found of a bias in the trajectory of the immigrant-Canadian-born earnings gap on the basis of repeated cross-sectional data in Canada. While low-earning immigrants are more likely than their high-earning counterparts to leave the cross-sectional samples over time, the same is true of the Canadian-born population. Thus, no evidence of a bias is observed when one compares immigrant earnings trajectories with the trajectories of the Canadian-born.

Keywords: immigration, assimilation, longitudinal data, selection bias

JEL Classification: J31, J61