Immigrant-Native Wage Gaps and Rent Sharing: A Segmented Assimilation Story?

Kevin Pineda-Hernandez, Rycx, François () and Volral, Mélanie ()
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Kevin Pineda-Hernandez: ULB (CEBRIG, DULBEA), UMONS (Soci&ter)
Rycx, François: Free University of Brussels
Volral, Mélanie: UMONS (Soci&ter) and ULB (CEBRIG, DULBEA)

No 18981, IZA Discussion Papers from IZA Network @ LISER

Abstract: Although an increasing body of literature has examined the relationship between firms’ profitability and wage inequality in the context of a diverse workforce, the role of rent sharing in explaining origin-based wage differentials has yet to be explored. Our paper aims to fill this gap using detailed Belgian matched employer-employee data from 1999 to 2016. After controlling for a wide range of covariates and addressing endogeneity issues, our estimates show that the wage-profit elasticity equals approximately 3% and does not differ statistically between native and immigrant workers, be they first or second generation. However, Oaxaca-Blinder decompositions suggest that rent sharing has a significant influence on immigrants’ wages through labour market segregation. Specifically, first-generation immigrants are found to earn lower wages than natives because of their higher concentration in firms with lower profit margins. The same is true for second-generation immigrants, but almost half as much. These findings, corroborated and refined by heterogeneity tests according to gender, educational attainment and level of collective bargaining, support the hypothesis of a segmented assimilation process for immigrants.

Keywords: rent sharing; natives; first- and second-generation immigrants; matched employer-employee data; wage decompositions; instrumental variables (search for similar items in EconPapers)
JEL-codes: C26 J15 J16 J31 J61 (search for similar items in EconPapers)
Date: 2026-09
New Economics Papers: this item is included in nep-eur and nep-lma
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