The immigrant wage gap and assimilation in Australia: the impact of unobserved heterogeneity

Abstract: Immigrants to Australia are selected on observable characteristics. They may also differ from natives on unobservable characteristics such as ambition or motivation. Controlling for unobserved heterogeneity, we find a wage gap for immigrant men from English-speaking backgrounds, in contrast with previous research. Controlling for unobserved heterogeneity also seems important for finding cohort effects. Immigrants that arrived before 1976 faced a larger wage gap compared to native-born Australians than subsequent cohorts. Confirming other research, we find wage gaps for immigrant men and women from non-English speaking backgrounds. All immigrants experience wage assimilation as time spent in Australia increases.