Is There Monopsonistic Discrimination Against Immigrants? First Evidence from Linked Employer-Employee Data

31 Pages Posted: 14 Apr 2012

See all articles by Boris Hirsch

Boris Hirsch

University of Erlangen-Nuremberg

Elke J. Jahn

Institute for Employment Research (IAB); University of Bayreuth; IZA Institute of Labor Economics

Abstract

This paper investigates immigrants' and natives' labour supply to the firm within a semi-structural approach based on a dynamic monopsony framework. Applying duration models to a large administrative employer-employee data set for Germany, we find that once accounting for unobserved worker heterogeneity immigrants supply labour less elastically to firms than natives. Under monopsonistic wage setting the estimated elasticity differential predicts a 4.6 log points wage penalty for immigrants thereby accounting for almost the entire unexplained native-immigrant wage differential of 2.9-5.9 log points. Our results imply that discriminating against immigrants is profitable rather than costly.

Keywords: monopsony, native-immigrant wage differential, discrimination, Germany

JEL Classification: J42, J61, J71

Suggested Citation

Hirsch, Boris and Jahn, Elke J., Is There Monopsonistic Discrimination Against Immigrants? First Evidence from Linked Employer-Employee Data. IZA Discussion Paper No. 6472, Available at SSRN: https://ssrn.com/abstract=2039658

Boris Hirsch (Contact Author)

University of Erlangen-Nuremberg ( email )

SchloƟplatz 4
Erlangen, DE Bavaria 91054
Germany

HOME PAGE: http://www.arbeitsmarkt.wiso.uni-erlangen.de/english/hirsch_e.htm

Elke J. Jahn

Institute for Employment Research (IAB) ( email )

Regensburger Str. 104
Nuremberg, 90478
Germany

University of Bayreuth ( email )

Bayreuth, 95447
Germany

IZA Institute of Labor Economics ( email )

P.O. Box 7240
Bonn, D-53072
Germany

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