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Real Exchange Rates and the Earnings of Immigrants

Christian Dustmann, Hyejin Ku () and Tanya Surovtseva ()
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Tanya Surovtseva: Universitat Pompeu Fabra, Department of Economics and Business and CReAM

No 2110, CReAM Discussion Paper Series from Centre for Research and Analysis of Migration (CReAM), Department of Economics, University College London

Abstract: Higher price levels in the destination relative to the origin increase the effective real wages of immigrants, thereby affecting immigrants’ reservation and entry wages as well as their subsequent career trajectories. Based on micro-level longitudinal administrative data from Germany and exploiting within-country and across-cohort variations in the real exchange rate (RER) between Germany and countries that newly joined the European Union in the 2000s, we find that immigrants arriving with high RERs initially settle for lower paying jobs than comparable immigrants arriving with low RERs. In subsequent periods, however, wages of high RER arrivals catch up to that of their low RER counterparts, convergence achieved primarily through changes to better paying occupations and firms. Our findings thus point to the persistent regional price differences as one possible reason for immigrants’ downgrading, with implications for immigrants’ career profiles and the assessment of labor market impacts of immigration.

Keywords: real exchange rate; reservation wage; immigrant downgrading; earnings assimilation (search for similar items in EconPapers)
JEL-codes: J24 J31 J61 O15 O24 (search for similar items in EconPapers)
Date: 2021-03
New Economics Papers: this item is included in nep-eur, nep-lab, nep-mig, nep-opm and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4) Track citations by RSS feed

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Persistent link: https://EconPapers.repec.org/RePEc:crm:wpaper:2110

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